U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 

For sale by the Superintendent of Documents, U.S. Government Printing Office

Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800

Fax: (202) 512–2250 Mail: Stop SSOP, Washington, DC 20402–0001

22–764 PDF 2005

STRENGTHENING AMERICA’S COMMUNITIES:

A REVIEW OF THE PRESIDENT’S FY 2006

BUDGET INITIATIVE

HEARING

BEFORE THE

COMMITTEE ON FINANCIAL SERVICES

U.S. HOUSE OF REPRESENTATIVES

ONE HUNDRED NINTH CONGRESS

FIRST SESSION

APRIL 6, 2005

Printed for the use of the Committee on Financial Services

Serial No. 109–13

(

(II)

HOUSE COMMITTEE ON FINANCIAL SERVICES 

MICHAEL G. OXLEY, Ohio, Chairman

JAMES A. LEACH, Iowa 

RICHARD H. BAKER, Louisiana 

DEBORAH PRYCE, Ohio 

SPENCER BACHUS, Alabama 

MICHAEL N. CASTLE, Delaware 

PETER T. KING, New York 

EDWARD R. ROYCE, California 

FRANK D. LUCAS, Oklahoma 

ROBERT W. NEY, Ohio 

SUE W. KELLY, New York, Vice Chair 

RON PAUL, Texas 

PAUL E. GILLMOR, Ohio 

JIM RYUN, Kansas 

STEVEN C. LATOURETTE, Ohio 

DONALD A. MANZULLO, Illinois 

WALTER B. JONES, JR., North Carolina 

JUDY BIGGERT, Illinois 

CHRISTOPHER SHAYS, Connecticut 

VITO FOSSELLA, New York 

GARY G. MILLER, California 

PATRICK J. TIBERI, Ohio 

MARK R. KENNEDY, Minnesota 

TOM FEENEY, Florida 

JEB HENSARLING, Texas 

SCOTT GARRETT, New Jersey 

GINNY BROWN-WAITE, Florida 

J. GRESHAM BARRETT, South Carolina 

KATHERINE HARRIS, Florida 

RICK RENZI, Arizona 

JIM GERLACH, Pennsylvania 

STEVAN PEARCE, New Mexico 

RANDY NEUGEBAUER, Texas 

TOM PRICE, Georgia 

MICHAEL G. FITZPATRICK, Pennsylvania 

GEOFF DAVIS, Kentucky 

PATRICK T. MCHENRY, North Carolina 

BARNEY FRANK, Massachusetts 

PAUL E. KANJORSKI, Pennsylvania 

MAXINE WATERS, California 

CAROLYN B. MALONEY, New York 

LUIS V. GUTIERREZ, Illinois 

NYDIA M. VELA ́ ZQUEZ, New York 

MELVIN L. WATT, North Carolina 

GARY L. ACKERMAN, New York 

DARLENE HOOLEY, Oregon 

JULIA CARSON, Indiana 

BRAD SHERMAN, California 

GREGORY W. MEEKS, New York 

BARBARA LEE, California 

DENNIS MOORE, Kansas 

MICHAEL E. CAPUANO, Massachusetts 

HAROLD E. FORD, JR., Tennessee 

RUBE ́ N HINOJOSA, Texas 

JOSEPH CROWLEY, New York 

WM. LACY CLAY, Missouri 

STEVE ISRAEL, New York 

CAROLYN MCCARTHY, New York 

JOE BACA, California 

JIM MATHESON, Utah 

STEPHEN F. LYNCH, Massachusetts 

BRAD MILLER, North Carolina 

DAVID SCOTT, Georgia 

ARTUR DAVIS, Alabama 

AL GREEN, Texas 

EMANUEL CLEAVER, Missouri 

MELISSA L. BEAN, Illinois 

DEBBIE WASSERMAN SCHULTZ, Florida 

GWEN MOORE, Wisconsin, 

BERNARD SANDERS, Vermont

ROBERT U. FOSTER, III, Staff Director 

(III)

C O N T E N T S 

Page 

Hearing held on: 

April 6, 2005 ..................................................................................................... 1

Appendix: 

April 6, 2005 ..................................................................................................... 45

WITNESSES 

WEDNESDAY, APRIL 6, 2005

Gutierrez, Hon. Carlos M., Secretary, United States Department of Commerce ..................................................................................................................... 7

Jackson, Hon. Alphonso, Secretary, United States Department of Housing 

and Urban Development ...................................................................................... 8

APPENDIX 

Prepared statements: 

Oxley, Hon. Michael G. .................................................................................... 46

Cleaver, Hon. Emanuel .................................................................................... 48

Gillmor, Hon. Paul E. ....................................................................................... 50

Hinojosa, Hon. Rube ́n (with attachments) ..................................................... 51

Matheson, Hon. Jim ......................................................................................... 60

Gutierrez, Hon. Carlos M. ................................................................................ 62

Jackson, Hon. Alphonso ................................................................................... 70

Johnson, Clay III .............................................................................................. 73

ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD

Frank, Hon. Barney: ................................................................................................

National Association of Housing and Redevelopment Officials, prepared 

statement ....................................................................................................... 76

National Association of Federal Credit Unions, prepared statement .......... 79

Community Development Financial Institutions Coalition, prepared statement ............................................................................................................... 80

Gutierrez, Hon. Carlos M.: 

Written response to questions from Hon. Steve Pearce ................................ 84

Jackson, Hon. Alphonso: 

Written response to questions from Hon. Steve Pearce ................................ 88

Johnson, Clay III: 

Written response to questions from Hon. Steve Pearce ................................ 89

U.S. Conference of mayors, National Association of Counties, National League 

of Cities, National Association of Local Housing Finance Agencies, National 

Association for County Community and Economic Development, National 

Community Development Association, National Association of Housing and 

Redevelopment Officials, Council of State Community Development Agencies, prepared statement ...................................................................................... 90

(1)

STRENGTHENING AMERICA’S COMMUNITIES: 

A REVIEW OF THE PRESIDENT’S FY 2006

BUDGET INITIATIVE 

Wednesday, April 6, 2005

U.S. HOUSE OF REPRESENTATIVES, 

COMMITTEE ON FINANCIAL SERVICES, 

Washington, D.C. 

The committee met, pursuant to call, at 1:12 p.m., in Room 2128, 

Rayburn House Office Building, Hon. Michael Oxley [chairman of 

the committee] presiding. 

Present: Representatives Oxley, Baker, Pryce, Bachus, Castle, 

Ney, Kelly, Shays, Miller of California, Tiberi, Kennedy, 

Hensarling, Garrett, Harris, Pearce, Fitzpatrick, Davis of Kentucky, Frank, Kanjorski, Sanders, Velazquez, Watt, Meeks, Lee, 

Moore of Kansas, Capuano, Crowley, Clay, McCarthy, Baca, Matheson, Scott, Davis of Alabama, Green, Cleaver, Wasserman Schultz, 

and Moore of Wisconsin. 

Chairman OXLEY. The committee will come to order. 

Pursuant to rule 3(f)(2) of the rules of the Committee on Financial Services for the 109th Congress, the Chair announces that he 

will limit recognition for opening statements to the Chair, Ranking 

Member of the full committee, and the Chair and Ranking Minority 

Member of the Subcommittee on Housing and Community Opportunity or their respective designees, to a period not to exceed 16 

minutes, evenly divided between the majority and minority. Prepared statements of all members will be included in the record. 

The Chair recognizes himself for the purpose of giving an opening statement. 

Today, the Financial Services Committee welcomes the Secretary 

of the Department of Commerce, Carlos M. Gutierrez and the Secretary of Housing and Urban Development Alphonso Jackson, to 

discuss the President’s initiative to overhaul the way the federal 

government funds and administers community and economic development. 

The Strengthening America’s Communities proposed in the Presi- dent’s fiscal year 2006 budget proposal is a new $3.7 billion program which seeks to reorganize and consolidate this nation’s community and economic development initiatives into a new program 

under the direction of the Department of Commerce. 

In addition to consolidating these programs under the Department of Commerce, the President’s proposal establishes strong accountability standards and a more flexible use of funds so that the 

communities most in need will be assisted. 

2

Currently, there are more than 35 federal programs in seven agencies that provide some $16 billion in grants, loans, and tax incentives to encourage community development and economic revitalization. The administration maintains that some of these 35 programs duplicate and overlap one another, have few accountability 

standards, and have inconsistent criteria for eligibility. 

By streamlining the process and consolidating these programs, 

the administration believes that federal funds marked for community development efforts can be more accurately targeted and used. 

I applaud the administration’s stated goal of creating a more targeted and unified program with stronger accountability standards 

and more flexibility. In addition, I support targeting funding to 

high-poverty areas in an effort to make a concrete difference in distressed areas. 

Yet, there are still many unanswered questions regarding the 

President’s new initiative. We have scheduled this hearing today in 

an effort to learn more of the specifics regarding the President’s 

new proposal and in hopes of gaining a clearer picture of just how 

this new proposal will continue the goals of community development for our distressed communities. 

On March 2, this committee held a hearing on the President’s fiscal year 2006 budget proposal. As Secretary Jackson will remember, much of the discussion at that hearing centered on the President’s new Strengthening America’s Communities Initiative. Questions were raised on how this new program would be structured, 

whether the Department of Commerce has the infrastructure and 

tools necessary to adequately assess the community development 

and housing affordability needs in communities across the country, 

and how the 35 programs will collapse into grant programs that 

will continue to meet the community development needs across the 

country. 

I know that many here today are anxious to learn more about 

the President’s bold new initiative. Many of us on this committee 

and in this Congress are hearing daily from constituents back 

home that have first-hand knowledge of how important programs 

such as the CDBG program are to their communities. They are 

asking questions and raising concerns about this new program initiative and whether it can continue to meet the critical economic 

and developmental needs of our communities. 

We trust that you will address many of those questions here 

today and that we will be able to work together in the months 

ahead to address your concerns for federal initiatives that not only 

meet strong accountability standards and allow for greater flexibility, but also continue to promote homeownership, community development and economic opportunity in our communities across the 

country. 

I now recognize the Ranking Member, the gentleman from Massachusetts, Mr. Frank. 

Mr. FRANK. Thank you, Mr. Chairman. You and I often are in 

agreement on some of the ways we approach things, but I do want 

to disagree at the outset with your expressed wish that we would 

learn more about this. 

I think I speak for a very large number of people in the Congress 

and the country in saying the less we hear about this in the future, 

3

the better. I do not think when this sinks finally beneath the sea 

that it will be greatly mourned. In fact, it is hard to take it seriously. 

We have been told that we should do a major rewrite of a number of very important social programs. It is now April and we have 

seen no specifics, not even general concepts. There is no legislation. 

Presumably, this is to take effect by October 1 of the next fiscal 

year. I do not know when we are going to see anything. I have to 

say that this approach, this program is at such a level of generality 

that it makes the President’s Social Security approach look like a 

detailed, micro-managed piece of specifics. 

I think what happened is this: The President has, with the support of the majority, reduced taxes very substantially while we 

were fighting a couple of wars and ramping up homeland security. 

He then announced that he wanted to reduce the deficit, to cut it 

in half. I do not think that there is any realistic chance of that happening while he maintains his tax cuts, but he had to make good 

on his promise. So he has sent to the Congress in his budget a 

number of proposals for substantial reductions in programs that no 

one, with the possible exception of himself, takes seriously, and I 

do not think he does either. Nobody thinks these things are really 

going to happen. I regret the fact that they are so distracting. 

I should express my gratitude to the administration. Let me say, 

I hope no one here will begrudge the time we have spent on this 

hearing because in fact, thanks to this proposal, this committee 

saved some time. We had a meeting that we would have had to do 

and we did not do it because of this proposal. In past years, we 

have voted as a committee on our recommendations to the Budget 

Committee on the President’s budget. This year, we did not have 

such a meeting. I believe we did not because a number of people 

on that side did not want to have to vote on this thing and vote 

against it, and they did not want to have to vote for it. So we did 

not have the meeting. So we are grateful to you for saving us the 

time. 

With regard to this program, I have rarely encountered as wide 

a reaction from a considerable range of people in opposition to this. 

Of course, it is not just CDBG that is involved here. There are 

other programs, not all of which are in our jurisdiction, but the 

Community Development Financial Institution program is in our 

jurisdiction. That has been very important for banks seeking to 

meet their CRA requirements. It has almost universally been opposed. 

In particular, what is troubling to me, let me close with this. We 

have in this country a severe housing crisis in many areas. We 

have a problem with housing being too expensive. The CDBG program as it is currently structured is available to be used in housing. Taking it down financially and consolidating it and putting it 

in Commerce appears to mean that it goes out of the housing business. The last thing we need is one more detraction from our ability to deal with housing. 

I said that was a final point. There is one other one. That is a 

philosophical one. Part of the argument is that you will not miss 

the money that we are cutting out of this program or this set of 

programs, and there will be substantial reductions because they 

4

have been consolidated. We do not know which program gets hit 

the worst yet, but there are substantial reductions. We are not 

talking about limiting growth. We are talking about actual reductions. 

But we are told we will spend it only in the poorest areas and 

that will make up for it. The problem with that is that I had hoped 

we would have as a goal allowing poor people to live other than in 

the poorest areas. De-concentration of the poor, which also means 

breaking up racial concentrations, ought to be an important piece 

of public policy. 

One of the things that happens, for instance, in a community 

where I live, the city of Newton, Massachusetts, which is not overall a poor community, but has low-income people. They use their 

CDBG funds to help build housing that is affordable in a community that is somewhat wealthier. By your standards, that would 

disappear. Our ability to give poor people a chance to move out of 

the poorest area would disappear. 

So this argument that it is a virtue to spend money on low-income people only in the poorest areas is a very insidious one. I do 

not think it was intended that way, but that is the effect, because 

it undercuts completely our efforts to integrate racially and to deconcentrate economically. So what you see as a virtue I see as a 

problem. 

We often push—and HUD has talked about this—about trying to 

get communities to accept low-income housing, not to have it focused. Well, when you take away the money that they use to do 

that, you make a mockery of the argument that they ought to locate that housing. Many communities use CDBG for that purpose. 

If HUD wanted to increase the pressure on them to do that, I 

would be more supportive, but in its current form this proposal 

makes very little sense. 

I would in closing say this is clearly something far too substantive for the Appropriations Committee to be dealing with in the 

sense that it is legislative. I hope we will be assured that nothing 

is going to happen here unless this committee gets a chance to 

have a markup and a vote. I find it hard to believe it would survive. 

Chairman OXLEY. The gentleman’s time has expired. 

The gentleman from Ohio, Chairman of the Housing Subcommittee. 

Mr. NEY. Thank you. There are several gentlemen from Ohio on 

the committee, so that is why I kind of hesitated, Mr. Chairman. 

Thank you, Mr. Chairman. 

Mr. Shays notes there is only one gentleman from Ohio, though 

he did not say who. 

[Laughter.] 

Thank you, Mr. Chairman, for holding this important hearing. I 

would like to again thank today’s witnesses. We worked with both 

agencies and also both individuals, although Mr. Gutierrez is relatively new. Already his department has helped us with the steelworkers and many tens of thousands of steelworkers and their families appreciate what has been done in the past and also what is 

being currently done through your department in working with Mr. 

Palmer and others. Thank you. 

5

Of course, Secretary Jackson, we worked countless times. We 

have also been fortunate to have you in our state several times 

doing some good things. 

The budget the Chairman has talked about CDBG, and the 

Ranking Member, I think that, of course, from my point of view 

raises some interesting and some serious questions about what role 

community development should play in helping our communities. 

Of course, there would be the consolidation. 

The question I raised before, actually, and noted with Secretary 

Jackson when he was here, and will also do with you, Secretary 

Gutierrez, is I applaud the administration’s goal of creating a 

stronger, more unified community and also keeping that focus on 

the areas that have higher poverty rates, obviously. We want to 

make the areas that have not done as well come up to better conditions. But within that context, I have had serious concerns because 

I am afraid if you take a program and you move it, a program that 

has had certain flexibilities, and this is the question I just pose out 

there to contemplate. This is why I have opposed moving it, publicly. But if you move it over into Commerce, would it then take 

on a life of its own in the sense of it would adhere to certain rules 

within the Department of Commerce? The structure would change. 

Now, I would caution, if you say, well, the structure will not 

change, then I would say then why move it? 

So those are kind of the two things that I would just pose out 

there about this issue because it is important. Again, when it 

comes to HUD, I know it has its challenges to ensure an effective 

community development program and to implement some of the accountability measures. But a lot of the tools that are used within 

this program as it is currently set up are so critical to communities 

across this nation. I would tell you, we have had a huge outpouring 

of opinions on this issue. 

So welcome, both of you. I look forward to working with both of 

your departments. Again, I thank both of you, off this issue for a 

second, the CDBG, for a lot of the good work you have done with 

not only our state, but across the nation. 

Thank you, Mr. Chairman. I yield back my time. 

Chairman OXLEY. The gentleman yields back. 

The Chair now recognizes the gentleman from Missouri, Mr. 

Cleaver. 

Mr. CLEAVER. Thank you, Mr. Chairman and Ranking Member 

Frank, for convening this hearing today on the President’s 

Strengthening America’s Communities proposal. 

Given the negative impact the proposal will have on my constituents, I look forward to hearing the testimony today from Secretary 

Jackson. 

Mr. Chairman, you may recall that the appearance of Secretary 

Jackson before this committee on Wednesday, March 2, 2005 resulted in more questions being raised than answers about the 

President’s proposal. On multiple occasions, Secretary Jackson testified that the Department of Housing and Urban Development had 

no specific information related to the President’s proposal or what 

was to become of the 18 programs that would be consolidated and/

or cut. I do not blame the Secretary for that lack of information beVerDate 0ct 09 2002 11:56 Oct 12, 2005 Jkt 000000 PO 00000 Frm 00009 Fmt 6633 Sfmt 6633 G:\DOCS\22764.TXT FIN1 PsN: MICAH
6

cause I do not think the administration has provided it nor did 

they think through that entire proposal. 

The absence of detail is also troubling, given the short timetable 

that would be necessary to implement the President’s proposal. 

However, the basic foundation of the proposal is so flawed that additional details are unlikely to make any difference. At its core, I 

am particularly concerned about cuts in funding the Community 

Development Block Grant, CDBG, program and transfer of the program from HUD to the Department of Commerce for consolidation 

of 17 other programs. The President would fund this new program 

at a level that is 35 percent lower than the combined fiscal year 

2005 appropriated levels for all 18 programs. The pro-rata reduction for CDBG alone is $1.42 billion. This troubles me because as 

former mayor of Kansas City, Missouri I have first-hand experience 

with the CDBG program and the Section 108 loan program. Despite what some people may say here in the beltway, I can tell you 

that these programs are effective and they have achieved quantifiable positive results. 

In addition, given the flexible nature of the CDBG program, 

these cuts will severely limit the ability of states and localities to 

address local housing and community development needs that are 

unique to that particular region. In Kansas City, Missouri alone, 

CDBG funded 80 programs including legal aid, crime prevention, 

homelessness assistance, small business development, sewer system improvement, senior citizen centers, neighborhood preservation 

and family service centers. 

Unless Secretary Jackson says today that this is not so, I am 

convinced that transferring CDBG from HUD to Commerce, housing initiatives will be more than likely ineligible to receive funds. 

As a result, mayors and local officials will lose an invaluable resource for creating affordable housing. For example, during my tenure as Mayor, my administration identified 60,000 single-family 

homes in need of rehabilitation or repair. The CDBG program directly contributed to the rehabilitation and construction of 12,000 

single-family homes. However, the President’s proposal will in essence prevent the construction or rehabilitation of the remaining 

48,000 homes and crush the dreams of 48,000 Missouri families. 

Mr. Chairman, Ranking Member Frank, I lived in a house with 

no running water, no electricity, no indoor plumbing until I was 8 

years old, and then my family moved into public housing, not far, 

Mr. Secretary, from where you left to come here to this great place 

called Washington, D.C. But my father, and I looked him in the 

eyes when he was able to buy a house and move it, because he 

bought it in a white neighborhood and had to move it into a black 

neighborhood, but I saw the pride in his eyes when he walked 

through the front door of our first home. My father then began winning the yard of the summer, because he was so proud of his home. 

I am telling you, if this CDBG program is cut, there are dreams 

that will fall to the ground and in many instances never rise again. 

As the former President of the National Conference of Black mayors, I have met with the National Conference of Black mayors leadership. I have met with the U.S. Conference of mayors. I held a regional meeting in Kansas City from Iowa, Kansas, Nebraska and 

Missouri. mayors came there from all over the region, small cities, 

7

large cities, urban and suburban, Republican and Democrat. Not 

one, not one Mayor is in support of these changes. I would dare say 

if any Mayor in the country campaigned that he or she was in 

favor of removing the Community Development Block Grant program from HUD to Commerce, he or she would be an ex-mayor. 

This program is critically important. We need it to continue. 

Mr. Chairman, on its face, the President’s proposal seems to have 

been conceived without any consultation with municipalities, the 

principal beneficiaries. Thus, I would like to invite Secretary Jackson to come to my district and take a tour of Kansas City, Missouri 

and the metropolitan area. Since the CDBG program and the 108 

loan program have been instrumental in revitalizing Kansas City, 

Missouri, I will show you, Mr. Secretary, building after building, 

business after business, home after home and job after job that 

would not have been realized without this vital program. 

The CDBG program has a proven record of success all over this 

country, like no other federal program. Its list of achievements includes creating affordable homes, revitalizing impoverished communities and creating jobs. I sincerely hope that Mr. Jackson will 

counsel the President to drop the Strengthening America’s Communities proposal because it should be killed in its infancy. 

Thank you. 

Chairman OXLEY. The gentleman’s time has expired. 

The committee now turns to our distinguished witnesses. Secretary Jackson, it is good to have you back before the committee. 

Secretary Gutierrez, welcome to Washington and certainly welcome 

to the Financial Services Committee. We are pleased to have both 

of you. 

Secretary Gutierrez, are you beginning? However you want to 

proceed, Secretary Gutierrez. 

STATEMENT OF HON. CARLOS M. GUTIERREZ, SECRETARY, 

U.S. DEPARTMENT OF COMMERCE 

Secretary GUTIERREZ. Thank you, Chairman Oxley and Congressman Frank, members of the committee. I appreciate this opportunity to discuss the President’s Strengthening America’s Communities Initiative. I am pleased to be here with my distinguished colleagues, and of course Secretary Jackson and Deputy Director 

Johnson. 

We are enjoying tremendous economic prosperity throughout the 

country. We have a responsibility to ensure that it reaches all corners of the country. The economy is strong and we want to make 

sure that it is strong for everyone. There are transitioning areas 

experiencing high levels of unemployment and poverty. President 

Bush is committed to improving the service to distressed communities that are working to create the conditions for economic growth 

and job creation. 

The President’s Strengthening America’s Communities Initiatives 

consolidates 18 community and economic development direct grant 

programs. The goal these programs share, and that I know we all 

share, is to increase economic opportunity in needy areas and raise 

the quality of life for the people living there. We believe that consolidating these 18 programs will eliminate duplication, will ease 

access to the federal system, will target assistance, will better acVerDate 0ct 09 2002 11:56 Oct 12, 2005 Jkt 000000 PO 00000 Frm 00011 Fmt 6633 Sfmt 6633 G:\DOCS\22764.TXT FIN1 PsN: MICAH
8

count for taxpayers’s dollars, and most importantly will achieve 

greater results. 

The basic concept is not new, Mr. Chairman. The Initiative for 

a Competitive Inner City, the Progressive Policy Institute and the 

U.S. Council on Competitiveness, among others, have called for 

some consolidation of these grant programs to improve service and 

efficiency. 

I recognize that much of the debate on the President’s proposal 

is focused on the level of funding in the fiscal year 2006 budget. 

Let me just note here that in fiscal year 2005, the federal government will spend a total of $16.2 billion on the overall suite of community and economic development programs. For fiscal year 2006, 

the President’s proposed budget calls for $15.5 billion in overall 

spending for community and economic development programs. This 

represents a 4 percent decrease and not the major reduction that 

some have claimed. 

Under the President’s proposal, funds would flow directly to communities and states in a formula grant form. This gives them important local control. What we ask in exchange for this broad flexibility is an agreement on performance measures so we can quantify 

the benefits at both the community and program level over the long 

term. Under the President’s plan, assistance is targeted to the most 

distressed communities. We anticipate the vast majority of Community Development Block Grant entitlement communities will qualify for the new program. Some areas, especially rural regions, will 

actually see more resources than under the current system. 

Today, distressed American communities face a federal maze of 

paperwork, programs and departments. We should and we can do 

better on their behalf. The President’s proposed restructuring of 

the development direct grant programs is designed to do just that: 

help our neediest communities strengthen their economies and create new American jobs. 

Mr. Chairman, I look forward to working with the members of 

this committee, the Congress and my colleagues on this important 

initiative. With your permission, I will submit my written testimony and I would be pleased to answer any questions. I will turn 

it over to my colleague, Secretary Jackson. 

Thank you, sir. 

[The prepared statement of Hon. Carlos M. Gutierrez can be 

found on page 62 in the appendix.] 

Chairman OXLEY. Thank you, Mr. Secretary. Your full statement 

will be made part of the record, as will Secretary Jackson’s. 

Secretary Jackson? 

STATEMENT OF ALPHONSO JACKSON, SECRETARY, U.S. 

DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT 

Secretary JACKSON. Chairman Oxley, Ranking Member Frank 

and members of the committee, I want to thank you for the opportunity to appear here today, as the committee begins its deliberation on the Strengthening American Communities Initiative, which 

the administration has proposed within the fiscal year 2006 budget. 

I, too, am pleased to be here with my colleague, Secretary Gutierrez. 

9

Let me briefly outline for the committee the motivation guiding 

the administration proposal and how the initiative will make the 

federal government a better partner in meeting the nation’s community and economic development needs. 

Today, potential grantees seeking funds for community and economic development projects must navigate a maze of 35 federal 

programs spread across seven different departments. Each program 

operates under a separate set of standards, and each has its own 

reporting requirements. These programs at times duplicate and 

overlap one another. They can be inconsistent in how they determine eligibility. 

The goal of the Strengthening America’s Communities Initiative 

is to consolidate 18 community and economic development programs into a single program. The new program will be administered by the Department of Commerce. It will build on the experience of HUD, Treasury and the other departments with related 

programs. I support the concept of consolidation as a catalyst for 

delivering more funding to communities in need. 

The CDBG program is the federal government’s largest single 

grant program to assist local governments in undertaking a wide 

range of community development activities. In the course of its 30-

year history, CDBG has provided a ready source of flexible funds 

for housing rehabilitation programs, public services, public facilities and infrastructure, and economic development activities benefiting millions of low-and moderate-income persons. 

While the formula has changed from time to time since 1974, the 

core variables have not been changed since 1978. In February 2005, 

HUD issued a report that offers four alternative formulas that 

would substantially improve targeting to community development 

need. This study will provide Congress and the Department of 

Commerce with formula options as it fashions the legislation for 

the new Strengthening America’s Communities Initiative. However, 

I would hope that this new initiative embrace the flexible use of 

funds that grantees under the current CDBG program have come 

to depend upon. 

In addition to CDBG, the administration’s proposal would consolidate and replace smaller HUD programs, including Brownfields 

development grants, grants to Round II Empowerment Zones, 

Rural and Economic Development grants, and the Section 108 

guarantee program. The Section 108 program has been used by a 

number of CDBG recipient communities to leverage their number 

of block grant dollars. Working with Secretary Gutierrez, I will 

seek ways to ensure that jurisdictions with previously awarded 

Section 108 loan guarantees to cities are not adversely affected by 

the transfer to Commerce. 

I will work with Secretary Gutierrez, my colleagues within the 

administration, and the other agencies affected by the consolidation 

as the Department of Commerce develops legislation that will be 

implemented with the Strengthening America’s Communities Initiative. 

I would like to thank all the committee for your support and I 

will submit my full testimony to the committee. 

[The prepared statement of Hon. Alphonso Jackson can be found 

on page 70 in the appendix.] 

10

Chairman OXLEY. Thank you, Mr. Secretary, to both of you. We 

appreciate your coming before the committee. 

Let me begin with what would be an obvious question to Secretary Gutierrez. That is, why would the Commerce Department 

better be able to administer the CDBG program? What particular 

expertise or other areas of influence would Commerce have vis-avis HUD? 

Secretary GUTIERREZ. Thank you, Mr. Chairman. 

The mission of the Commerce Department is focused on community and economic development. We have experience in working 

with local communities in developing performance measures that 

are tied to results. Very importantly, we have a network to the private sector which would enable us to attract private investment to 

local communities. So in putting a growth, job creation, economic 

development, community development focus on these grants, that 

would fit very well into the mission of Commerce. It would fit very 

well in what we do today, what we have experience doing, and we 

believe we can fulfill that mission with this community development program, sir. 

Chairman OXLEY. How, specifically, would that work? That is, 

Commerce and their ability to attract private investment? We are 

not talking about trusts or anything like a charitable kind of thing. 

We are talking about private investment, right? 

Secretary GUTIERREZ. Yes, sir. 

Chairman OXLEY. Just kind of take us through an example of 

how would that work. Would you play a mediating role or a consulting role? How does the department fit into this whole equation? 

Secretary GUTIERREZ. Our role, Mr. Chairman, would be in working with local officials and communities in developing the strategic 

plan, ensuring that there are adequate performance measures in 

place, and then very importantly giving all the support to the local 

communities to have them invest the funds as they see fit in a 

manner that would best achieve those objectives. 

Chairman OXLEY. It seems to me HUD could do precisely the 

same kind of arrangement? 

Secretary GUTIERREZ. Well, it is something that we already do 

today in our EDA grants. We have seen that many of those grants 

have performed and the objectives have been set. We have a little 

ratio that we use of $32 leveraged for every dollar that we invest. 

Part of that leverage is private sector investment that we were able 

to attract to local communities. Ultimately, we believe that these 

programs will work if we can point to job creation; if we can point 

to economic growth; if we can point to a tangible improvement in 

that community’s performance. We have experience in doing that 

today. We essentially do that today with our EDA grants. That is 

what we would like to do with the broader community development 

grants. 

Chairman OXLEY. Secretary Jackson, Assistant Secretary David 

Sampson has said, ‘‘the highest level of poverty’’ would be the 

standard used in the new formula under Commerce’s proposal for 

distributing money. Mr. Secretary, is the highest level of poverty 

the basis of the current formula for CDBG at HUD? 

Secretary JACKSON. No, it is not. There are a number of areas 

that we look at. We look at the community, how the community 

11

has developed over the time. Poverty is one of the variables. But 

in looking at that, we look at communities within the community, 

not necessarily the city as a whole. So you can have a city, the best 

example I can give you is Detroit. You can have a city like Detroit 

where we spend about $50 per capita for each one. But if you look 

at Oakland, we spend about $6 per capita because even with Oakland, a very prosperous community, you still have pockets of poverty. You still have pockets of areas that are pretty depressed. 

So the block grant has a clear discrepancy as to how the money 

is spent. So it is not just spent because you have a very prosperous 

community. We look at if there are pockets of poverty as one of the 

subjects that we look at, not totally as the subject. 

Chairman OXLEY. So there would be a change, then, in that 

standard as proposed by the administration. Is that correct, or am 

I missing something? 

Secretary JACKSON. If poverty is the only basis or the highest 

basis, yes. Poverty is one of the bases that we look at. We look at 

how the city has matured, the housing stock of the city, the infrastructure of the city, when you take it into consideration. If you 

look at a city like Baltimore, when we were doing housing development with Community Development Block Grant funds, one of the 

important things were in rehabilitating a specific community, we 

had to look at the infrastructure. The infrastructure was totally 

outdated. So before we could go in and make any changes within 

that community, we had to address the infrastructure. So the infrastructure was just as important as poverty, as not having a very 

viable community at that point. 

Chairman OXLEY. Thank you. My time has expired. 

The gentleman from Vermont, Mr. Sanders? 

Mr. SANDERS. Thank you, Mr. Chairman. 

We welcome both Secretary Gutierrez and Secretary Jackson 

with us. Thank you. 

Let me begin by expressing my strong agreement with Representative Cleaver. I was a Mayor for 8 years of Burlington, 

Vermont. The CDBG program worked extraordinarily well. I have 

to tell you that I regard it as an outrage that in the midst of a 

housing crisis that exists in many parts of this country that CDBG 

funding will not be able to be used for affordable housing. 

Also, for an administration that tells us that they believe in 

bringing people together, how can you develop policy in which virtually every mayor in America is in opposition, League of Cities 

and Towns are in opposition? You are supposed to be listening to 

the cities and towns of America, not using the arrogance of power 

to tell them what is good for them. They are in disagreement. I 

would urge very strongly that you listen to what they have to say. 

Mr. Chairman, I found Secretary Gutierrez’s remarks particularly interesting. He began his remarks, and I quote, by saying, 

‘‘the President and the administration start with the belief, first 

and foremost, that the tremendous economic prosperity America 

enjoys has not reached all corners of our country.’’ Tremendous economic prosperity. Did I hear you correctly on that one? 

Secretary GUTIERREZ. Yes, sir. 

Mr. SANDERS. Maybe the confusion is that some folks to go country clubs and go to fundraisers with millionaires and billionaires. 

12

I have to agree with you. Those people are doing very well. But I 

would suggest, Mr. Secretary, that if you talk to the middle class 

of this country, they do not believe that they are enjoying tremendous economic prosperity. 

How can you talk about tremendous economic prosperity when 

over the last 4 years we have seen an increase in poverty in America by four million people? How do you talk about economic prosperity when almost 22 percent of the children in America live in 

poverty, which is by far the highest rate of childhood poverty? How 

do you talk about economic prosperity when more than four million 

more Americans have lost their health insurance? Forty-five million Americans today have no health insurance. 

How do you talk about economic prosperity when 1.6 million 

American families went bankrupt recently, and most of that bankruptcy had to do with the loss of a job, a medical emergency or a 

divorce? How do you talk about economic prosperity when the new 

jobs being created today pay 21 percent less than the jobs that are 

being lost? How do you talk about economic prosperity when the 

middle class is shrinking and the gap between the rich and poor 

is growing wider? 

So my question to Mr. Gutierrez, almost 22 percent of our children live in poverty. That compares to European countries where 

in many cases, 2, 3, 4 percent of their children live in poverty. Can 

you tell the parents in this country whose kids live in poverty 

about economic prosperity? Are you ashamed? Do you think there 

is something fundamentally wrong in a country as wealthy as ours 

when 22 percent of our kids live in poverty? Mr. Secretary? 

Secretary GUTIERREZ. Congressman, let me address your question with facts and the numbers that I have. This economy is growing at, the last number for 2004, is 4.4 percent. That puts us as 

number six of the top 20 economies in the world. 

Mr. SANDERS. And corporate profits are also going up. What is 

happening to the average worker, Mr. Secretary? 

Secretary GUTIERREZ. So if I could just finish the thought on the 

economy. We are number six in the top 20 economies in the world. 

The only five that are growing faster are developing economies. So 

if you take large developed markets, there is no market in the 

world that comes close. 

Mr. SANDERS. True, but not relevant to the needs of ordinary 

workers. Their wages are going down. 

Secretary GUTIERREZ. In terms of average income, which would 

be the best way to measure if our jobs are generating more income 

than not, the average income during this administration’s time in 

office is up 10 percent. 

Mr. SANDERS. The average income is, excuse me, average income 

is not the best way to determine what is happening for ordinary 

families. If you are a billionaire and I am broke, on average we 

have $500 million. That is not what is important. What is important is the real income of middle class families, which is going 

down. The rich are in fact getting richer and that distorts this 

whole question of average income. 

Secretary GUTIERREZ. Congressman, the numbers I see show that 

average income is up 10 percent. If the jobs we were creating were 

lower-income jobs, I think we would see that number going down. 

13

Unemployment is at 5.2 percent. That is the lowest it has been 

versus the average of the last three decades. 

Mr. SANDERS. Mr. Secretary, I apologize for having to interrupt 

you, but I have a limited amount of time, so forgive me for doing 

that. 

Chairman OXLEY. The gentleman’s time has expired. 

Mr. SANDERS. Let me just ask one last question, if I might, 

please? 

Do you disagree that real inflationary-adjusted wages have gone 

down over the last 2 years? Do you disagree with that fact? 

Secretary GUTIERREZ. Congressman, the number I have is that 

average income, adjusted versus inflation, has grown 10 percent 

since this administration took office. 

Mr. SANDERS. You are not answering my question, sir. 

Secretary GUTIERREZ. I do not have those specific facts, sir. 

Mr. SANDERS. Thank you. 

Chairman OXLEY. The gentleman’s time has expired. 

Would the gentleman come forward and take the Chair, the gentleman from Ohio? 

Mr. NEY. It does not come off my time, right, Mr. Chairman? 

Chairman OXLEY. No. 

[Laughter.] 

Unless you are slower than I think. 

[Laughter.] 

Actually, he has deceptive speed, Mr. Secretary. He is actually 

moving slower than it looks. 

[Laughter.] 

Mr. NEY. [Presiding.] Thank you very much. This is not for the 

purpose of theater. He has to leave, the Chairman does, so that is 

why I am moving over into here. 

I want to ask a first question of Secretary Jackson. OMB had an 

analysis, the OMB PART, and in that analysis it was not very favorable to this program. Do you have any comments on that? 

Secretary JACKSON. Are you talking about the PART scores? 

Mr. NEY. Yes. 

Secretary JACKSON. Yes, when we came into office in 2001, OMB 

was in the process of doing an evaluation of a number of programs 

within HUD, including the Community Development Block Grant 

program. They made some suggestions. I took the suggestions as 

an instrument for improving the Community Development Block 

Grant program. In that process, they said that there were not adequate tools in place to judge the outcome of the program. 

So what I did, Mr. Chairman, is I brought together the professionals in the industry, the industry people and top-level people 

from OMB on a monthly basis for the last 14 months to come up 

with some positive way to measure the outcomes. We submitted to 

you about a month ago four different formulas that we think will 

address a number of the issues that were brought up in the PART 

scores. 

We think still today that we addressed many of the issues that 

were brought up. I was asked last time by Chairman Oxley, had 

OMB been back in to assess that. No, they have not, but I think 

that they had great input in developing much of the performance 

14

that we presented to Congress to try to address the issues that 

were raised in the 2000 PART. 

Mr. NEY. Thank you. 

Secretary Gutierrez, some people have said the CDBG would be 

cut 30 percent; some have said 4 percent. There is quite a discrepancy in the two. Would you want to comment on that? 

Secretary GUTIERREZ. Yes, sir. There are 17 programs that would 

currently be folded into one program. One of those is CDBG. The 

remaining programs would actually, I am sorry, 18 programs would 

be folded in; 17 programs would stay the same. The 18 programs 

would be folded into one program. If we add up the two, we are 

talking about $15.5 billion of spending. That compares with $16.2 

billion in this fiscal year. 

So the overall pot of money that would be invested in community 

and economic development programs would decline by 4 percent. If 

you take individual programs, you can come up with a higher percentage, but overall, the overall pot that we will be working with 

and we will be investing in community development and economic 

development will be $15.5 billion, compared to $16.2 billion. 

Mr. NEY. So some programs would have a higher percentage 

within a program, but overall you are saying it is 4 percent. It is 

not an overall 30 percent. 

Secretary GUTIERREZ. It is 4 percent decline. You are right, some 

programs would see an increase within that number, yes, sir. 

Mr. NEY. I think the question I had on this before, and if either 

of the Secretaries would want to answer it, let’s say this happens 

and it shifts from HUD over to Commerce. Does it just shift in one 

total package as it is? Or do there have to be new rules written 

by Commerce, for example? Does HUD just shift it over verbatim? 

Are you to that stage yet, either Secretary, on that? 

Secretary JACKSON. All I can say is that what we did from our 

budget, that is fiscal year 2005, was $4.5 billion. We zeroed out 

$4.5 billion out of our budget for 2006. 

Mr. NEY. So then can anybody answer, does this, when it shifts 

over, does it come over that every, the point I am trying to get to, 

every way that HUD ran this and criteria and its usage, would 

that just come over also verbatim language? We know the money 

will come over. What about the language? 

Secretary GUTIERREZ. Congressman, we plan to introduce legislation at the end of April. We have an advisory committee in place 

which is helping us sort through some of these details. We would 

hope that we can work out some of the rules with this committee 

and determine how best to utilize this money and how to design 

this program. We have an opportunity to design this program from 

scratch. I believe, Mr. Congressman, that if we had to start from 

scratch, and if we had the opportunity as we do to redesign a program, I do not believe we would design it the way it is today. So 

we would look forward to working with you on that. 

Mr. NEY. Thank you. My time has expired. 

Mr. Meeks, the gentleman Mr. Meeks is next. Excuse me, my 

mistake. 

The gentleman, Mr. Kanjorski? 

Mr. KANJORSKI. Thank you. 

15

I do not usually identify with my friend from Vermont as well, 

but this is probably the first time I understand his reaction to both 

of your programs. Let me talk about just the broad view. I am really astounded that the administration, with a great opportunity, 

would have been so crass as to not work closely with the committee 

to reconstitute these programs with the thought process. The last 

time I looked at the Constitution, Mr. Secretary, the Congress 

writes the laws, not the administration. They assist us or request 

certain legislation will be introduced, but the Congress passes that 

legislation. 

So the formulas, if they are going to be changed, the structure 

if it is going to be changed, is going to start at this committee and 

move through the full House; start in the Senate committee and 

move through the full Senate. I cannot believe the crassness of 

your two departments and the White House has in regard to reformulating programs that are so fundamental to the American people. 

You know, quite frankly, we had a reorganization meeting of one 

of our subcommittees. I was one of the people who think we probably should take the time to look at how our programs are operating and whether we can do things to make corrections or changes 

that would be advantageous to the community. But I never believed that we would have two cabinet officers and the White 

House coming up here with a hatchet and just going at something 

like Community Development Block Grant. I am not sure you are 

just talking about a marginal cut, and yet some of the information 

that we are receiving it looks just in community development we 

are talking about a 35 percent cut, if the other programs are to 

continue to exist. 

When you talk about a 35 percent cut or even a 10 percent cut, 

you are literally shooting at the heart of not only the largest cities 

in America, but most of the middle-sized cities of America that absolutely rely on community development money to put together and 

leverage larger projects. I think your indication is, you must have 

concluded that with this tremendous increase in average income in 

the United States, there has been a tremendous increase in infrastructure investment in the United States. Do either of you gentlemen suffer from that delusion? 

Secretary GUTIERREZ. Congressman, we are here because we 

would like to work with this committee. We have an advisory committee in place that is advising us so that we can bring forward 

the best recommendation. 

Mr. KANJORSKI. Just a second, let me stop you right there for a 

second. 

Secretary GUTIERREZ. Yes, sir. 

Mr. KANJORSKI. I just read in the paper, it was either the Post 

or the New York Times, some comments of my Republican colleagues in the Senate, castigating this administration as one of the 

worst administrations in terms of its relationship with the Congress. Those are not my words. That is Republican members of the 

Senate and the House saying that. I am going to tell you, they are 

winning me over. 

The idea that you would come up here and just say, we are going to take $4.5 billion out of HUD, turn it over to Commerce, and we 

16

are going to tell you about it in a month when we send the legislation up, that even beats the President’s Social Security plan, that 

I have not seen yet. I mean, you fellows have structured a phantom 

idea down there that you do not have responsibility to the constituents of this country, to their elected representatives, or to reality. 

I understand your background and I have a great deal of respect 

for it as a CEO executive. Would you ever come to a board of directors, if you can talk about it in that term, in a corporation and say, 

I have the plan; I am going to give it to you in two months, but 

it is going to do this, and we ask you to go along with it, and that 

is what we are here for. Or would you have committees working 

on it? Would you have analysis? 

Because I am not convinced that any of you have Community Development Block Grant experience that you really know how it 

works out there in the field. If you think you do, why don’t you 

spend a day with me? I will take you to my district and I will show 

you what is done with it, how it operates, and how significant a 

blow this would be to almost every middle-size community in my 

Congressional district. 

The other programs, I have got to tell you, I am experienced with 

the Commerce Department and EDA. If I had my druthers, I would 

double the funding because I think they do an effective job at very 

little regulation, with very little control, and get leverage of incredible capacity. I would hope that you would be looking at programs 

like that and say how we can better leverage private sector money 

with government money to create jobs, create infrastructure, and 

improve conditions. But to start off with the idea, and I think you 

ought to disabuse yourself of that fact. If you think the average income in the United States, average income if you knock off the two 

extremes, have really gone up 10 percent, then we are not even 

talking. 

I agree with you. CEO salaries in the last 5 years, in the last 

years have increased significantly. But I could take you to any 

number of industries where benefits are taken away from people, 

contributions are required for health funds, and salaries or wages 

are being held tight or being reduced. I do not know where you are 

all living. 

Mr. NEY. The time has expired. 

Mr. KANJORSKI. If I just maybe for a second. You know, I actually do have some friends up in the country clubs and every now 

and then I try and go on their turf. I get the amazing response to 

them. They are usually pretty high-priced people, $100 to $500 an 

hour people. And they all stand around and complain about the 

plumbing bill they just paid, and did you hear at the local plant 

they just had a wage increase to $18 an hour? You know? And most 

of these guys are sitting around making $150,000, $200,000, 

$400,000, $500,000 a year, and they are complaining about that 

guy making $36,000 a year. I think that is what I see in this presentation and this administration. You are out of touch with reality, 

gentlemen. 

Mr. NEY. The time has expired. 

Mr. Bachus, the subcommittee Chair. 

Mr. BACHUS. Thank you. 

17

Mr. Secretary, I am actually optimistic by what I hear today, and 

let me tell you why. I am sure that shocks a lot of people. Everyone 

here has expressed the same goal and that is helping the distressed 

areas, helping the poorest communities. Mr. Kanjorski just talked 

about country clubs. You know, there are affluent communities 

where there are 10 country clubs in one small community. There 

is a gap, as Mr. Sanders said, between the rich communities and 

the poor communities. The bottom line, and Mr. Sanders said this, 

the bottom line is helping the poorest communities. 

That is what President Bush says he wants to do and that is 

what you say you want to do. But what I am hearing is that there 

are affluent communities and there are poor communities, and we 

need to focus on the poor communities. It is my understanding that 

that is what you are proposing. 

So let me just ask you one question. I think maybe it will cut 

to the chase, because every member has said, Mr. Ney, he said the 

most severely distressed areas. Mr. Cleaver said we have got to 

help the poorest people in the poorest neighborhoods. He and I both 

come from families, we were raised in areas where we did not have 

homeownership. I did not have a homeownership until I was 12. I 

remember the pride he had. So I think we are all concerned about 

the poorest communities. 

Now, when OMB looked at the Community Development Block 

Grants which everybody is defending as a wonderful formula, and 

Mr. Kanjorski says you are talking about reformulating this. When 

they looked at it, they found, they looked at the 200 richest communities in America and the 200 poorest communities in America. 

What they found was that 35 percent more money was going to 

the richest communities than the poorest communities. Now, is 

that accurate? It sounds crazy. It sounds crazy that the National 

League of Cities would not be standing on their head talking about 

the need to do exactly what the Bush administration is doing, and 

that is reformulate the formula so it goes to the poor communities. 

Secretary GUTIERREZ. Congressman, your facts are absolutely 

right. I can show you communities with a poverty rate of 2 percent, 

3 percent, that are receiving a significant proportion of the money. 

What this administration is saying is let’s use that money for the 

people who need it the most. So I believe it is a very clear and a 

very noble objective. 

Mr. BACHUS. Well, doesn’t this discrepancy where more money 

has gone to the rich communities than the poor communities meant 

that what we have been doing in the past with community and economic development has not worked the way we want it to work? 

Because the goal, and I will quote another one of my Democratic 

colleagues, the goal is obvious: to target the severely distressed 

communities and neighborhoods. 

Then he says, that is what is Community Development Block 

Grants are doing. That is not what the figures show, is it? Would 

you like to comment? How does the Strengthening America’s Communities, which has been so roundly criticized as something to do 

with the gap between the rich and the poor, I think it maybe does 

in that it is going to target the poor for more help. But how does 

it address the gap between the rich and the poor that we are all 

concerned about? 

18

Secretary GUTIERREZ. As you were saying, we want to make sure 

that the money is invested in those communities that need the 

money the most. I can also show you some, we picked out some 

communities just randomly and looked at results, and looked at 

performance measures. If you look at the poverty rate back in 1980 

and since then, millions and millions of dollars have gone into some 

communities and the poverty rate today is higher than it was in 

1980. So what we are saying is, we want to give the money to those 

communities that need it the most. And very importantly, we want 

to measure the results and make sure that we are improving the 

conditions of those communities. 

Mr. BACHUS. Why does the press, including the New York Times 

and The Washington Post, why haven’t they pointed out, particularly to their poorest constituents, that they are being mistreated 

and are not getting fair treatment, that 35 percent more money is 

going to, and that is per person, in the 200 most affluent communities in this country? They have received 35 percent more per person, per poor person, than the poorer cities. Why are the papers 

screaming about you wanting to reformulate this and base it more 

on poverty? 

Secretary GUTIERREZ. It is a good question, Congressman. 

Mr. BACHUS. Do they really like poverty? Do they really care 

about people that are poor? 

Mr. NEY. The time has expired. 

Secretary GUTIERREZ. We have an opportunity here to redesign 

and to start from scratch. Again, if we had to start from scratch, 

I do not believe we would design the system as it is today, and it 

is a wonderful opportunity to use our taxpayers’s money in a wiser 

fashion. I believe we owe it to our citizens to do that. 

Mr. BACHUS. I agree. It is a wonderful goal and it needs to go 

to those folks that are intended to be helped. 

Mr. NEY. The time has expired. 

The gentleman from New York, Mr. Meeks. 

Mr. MEEKS. Thank you. 

I am baffled by this also. I mean, generally sometimes we come 

and we have an issue when you can see things clearly, particularly 

all of the cities, Democrats one way, Republicans another way and 

things of that nature. But here we have, as the former mayor of 

Cleveland talked about, a situation where basically every Mayor, 

every Mayor, be he or she Democrat or Republican, those that administer the monies, those that are down on the ground at the 

level to make sure that the needs are being taken care of where 

they need to be taken care of, are basically against this consolidation. 

Let me just basically talk about my Mayor, who hosted the Republican convention this past year, Mayor Michael Bloomberg, 

sending a letter to all of us and sending, I guess, to you also that 

he is writing to express his opposition to the Strengthening America’s Communities Initiative. And he talks about the fact that by 

the 18 existing programs scheduled for consolidation were funded 

at $5.6 billion, while the administration’s proposed budget for their 

replacement is only $3.7 billion. 

He talks about New York City, which received nearly $250 million in 2004 through just two of these programs, the CDBG and the 

19

CSBG program. And he enclosed the details of how in fact he did 

utilize this money and it was utilized to help the poor and underserved, and that by cutting back we are really going to be hindering taking care of those who are least fortunate. 

As I know Mr. Cleaver, and I heard Congressman Bachus indicate, I, too, if it was not for certain funding, coming from a poor 

neighborhood, and understanding the district which I represent, 

this will severely hurt them. Let me just give you an example. Let 

me ask a question, for example. We were trying to do a project in 

our district, and this is I guess under Commerce at one time, because what is important is some retail development. 

At times, retail development becomes the cornerstone of economic 

benefit. We tried to go through EDA. We had a local community 

development corporation go through EDA trying to get $1 million. 

It was denied because EDA indicated that they were not willing to 

look at a major retail development. We lived in a place called Rockaway, New York at that time. 

So my question is, that this would have been a public-private 

venture; something that would have gone to the cornerstone of economic redevelopment in the community, creating jobs and everything, but yet from Commerce’s perspective, they are not in this 

business, or at least they were not with reference to EDA programs. 

So my first question would be, if this money was shifted over, 

would a similar determination be made when you are talking about 

retail development? Because we were able with this other money 

to have the flexibility to do what was necessary and what is necessary to economically revitalize distressed communities, or what I 

like to call new market communities. 

Secretary GUTIERREZ. Congressman, I am not familiar with the 

specific example that you cited. I will say that part of the concept 

here is to allow local communities to invest the money where they 

see fit to meet performance standards such as economic growth, 

such as employment, such as the poverty level. I would tend to 

agree with you that in some cases, a retail outlet can make a big 

difference for a community. There are many other types of investments that can make a difference for a community, that can lower 

the crime rate in a community, that could increase the value of real 

estate in a community. 

So it all depends on what is right for the community. If we can 

just agree on performance standards, then we can let local people 

invest that money where they see fit, because they understand, 

they know their community the best. 

Mr. MEEKS. If you are talking about performance standards, then 

I still do not understand. If you are talking about evaluating programs, et cetera, why then shift jurisdiction away from HUD to 

Commerce, if it is just, you know, the process of evaluating and if 

you are talking about evaluating where the money is going or how 

it is being spent, and you have this set up, why not just tell HUD 

to do it? Why is it necessary to shift the money from HUD to Commerce? 

Secretary GUTIERREZ. It is not only, if I may, Secretary Jackson, 

it is not only HUD. There are programs in five different agencies, 

18 different programs. Each requires a different approval mechaVerDate 0ct 09 2002 11:56 Oct 12, 2005 Jkt 000000 PO 00000 Frm 00023 Fmt 6633 Sfmt 6633 G:\DOCS\22764.TXT FIN1 PsN: MICAH
20

nism. Each has different performance standards. Each requires a 

tremendous amount of bureaucracy. What we are saying is to shift 

the money into one area where it would be focused on one objective, which is to put it behind the areas that need it the most, to 

give it to local people, to invest it behind performance standards. 

As I mentioned before, there is experience in the Commerce Department. It is part of our mission to foster economic growth, to 

foster job creation. So this would make sense to put in that overall 

pot of money and put it behind that EDA effort. 

Mr. NEY. The time of the gentleman has expired. 

The gentlelady from Ohio, Ms. Pryce? 

Ms. PRYCE. Thank you, Mr. Chairman. 

Secretary Gutierrez and Secretary Jackson, thank you very much 

for being here today. 

I just want to clear up a few things in my own mind. The CDBG 

program currently affords a lot of flexibility to communities. It allows them to meet their unique needs. It works fairly well from 

where I come from. I was pleased to hear in your testimony that 

you want to continue to be as flexible as possible and also expand 

on flexibility. 

I would be interested to hear your thoughts on how the new program will compare to the CDBG program in terms of flexibility 

when it comes to whether or not communities will be allowed to invest in community infrastructure and services, as well as housing. 

Will those be allowable activities? Either one of you or both of you? 

Secretary GUTIERREZ. As I mentioned before, flexibility is an important concept and it is an important objective of the new strategy, if you will, for investing this money. Using local knowledge 

and local objectives the local people are the ones who best know 

where to invest it. There are occasions, as you say, where infrastructure can make a difference; where if we reduce a crime rate 

in a specific community, that that will be an incentive for businesses to invest capital; that if we improve the quality of the housing and the infrastructure, that that will increase the value of real 

estate. That, in turn, can make it more attractive for job creation. 

So specifically to your question, yes, if that is what makes sense 

in a local community and is what will really make a difference, this 

program will allow for that. 

Ms. PRYCE. And that is your understanding, too, Secretary Jackson, that housing and infrastructure services will all be a part as 

long as it helps to create jobs and improves economic activity in 

these areas? 

Secretary JACKSON. I will do everything in my power in the process of developing the legislation to make sure that it is inclusive 

to continue the flexibility that is presently in the program. 

Ms. PRYCE. Okay. I am particularly impressed by the emphasis 

on accountability, those aspects of your proposal, the performance 

standards, and wonder if you know how that will be implemented. 

It seems to me that will be something new and additional that we 

have not done before and costly to develop and implement. Where 

are we going to realize all this savings? Will there be actual cuts 

or are we going to see the savings come from the combination in 

the administration of all these 18 different programs? I assume 

21

much of it will come from there. Or do you really envision cuts in 

dollars that are administrative? 

Secretary JACKSON. Let me answer this first because I have 

heard on numerous occasions about accountability. It is important 

to understand that, yes, there are some flaws in the present community development program. When we came to office, we had a 

backlog of $370 million with 200 projects. Today, we have a backlog 

of 25 projects with $50 million. 

It is because of accountability, because of what was said by OMB 

in 2001 that we got together with OMB, with the industry, with 

the professional groups, to develop some alternate plans which we 

submitted to you to address the issue. Many of the issues that were 

raised in the 2001-2001 audit have been addressed because we 

agreed specifically with OMB that there was an accountability 

problem that had existed at HUD not just that year, but going way 

back 10 years, 12 years as it relates to this program. 

So we have done that and that is why I said in my opening statement that in the transfer to Strengthening America, we will consistently work with Secretary Gutierrez to make sure that these accountability measures that we have already put in place are successful going forward in the new program. 

Now, yes, there are still problems, but I want everyone to understand that HUD has not been sitting on its tush for the last 3 

years. When OMB came in and made the recommendations, I 

empanelled, I stress again, I empanelled people from the industry, 

people from the profession, and people from OMB who had made 

the PART study to correct many of the issues that we were seeing. 

Now, getting to the point, I do believe, and I will support wholeheartedly what the administration and the President has said, the 

economic development programs should be consolidated. I do not 

back off of that commitment. But it is not necessarily because the 

program has been totally inaccurate and ineffective. That is not the 

case. It had been, but clearly with the suggestion and the position 

that was stated to us during the first PART score by OMB, we immediately began to empanel people to address the needs that we 

talked about by OMB. 

Mr. NEY. The time has expired. 

The gentleman, Mr. Watt? 

Mr. WATT. Thank you, Mr. Chairman. 

Let me first apologize to the witnesses for not being here to hear 

their testimony in person. Perhaps this became clearer as a result 

of the testimony, but maybe a better substitute for live testimony 

is the actual written statements. So I went immediately to the 

written statements and started reading them. 

I quickly came to the realization that I think is leading to the 

consternation that is being expressed. Secretary Gutierrez, I am 

particularly interested in the comments in your statement. I start 

with page six, where you have a sentence that says the underlying 

premise of the President’s proposal enjoys diverse support. So I 

went searching for the underlying premise of the President’s proposal. I came away with several different things. 

First, I went back to page four, and it said fiscal year 2005, the 

federal government will spend on the overall suite of community 

and economic development programs a total of $16.2 billion; the 

22

President’s proposed budget for fiscal year 2006 calls for overall 

spending for community and economic development programs of 

$15.5 billion, a 4 percent decrease. 

So my first question is the underlying premise of the President’s 

proposal to reduce the amount of money. I then went to the bottom 

of the page and I saw this comment, those communities that face 

the biggest challenges should receive the most assistance from the 

federal government. So I started to question, is this whole area 

going to be a means test? Is that the underlying premise that you 

say everybody is committed to? 

And then I went to the next page, that is page five, and it says 

the best anti-poverty program is a good job. I wondered if it matters to a person who is looking for a job whether his or her job is 

located in the most distressed community or somewhere else within 

the city that they will be working in? So what exactly is the underlying premise that we are dealing with? 

And then I went to the third paragraph on that page, and it says 

the Commerce Department works closest with the private sector 

and has had the most success in leveraging private sector resources. So I started to wonder whether the underlying premise is 

increasing private sector involvement or partnering in these programs. 

But then I went to the last paragraph on that page and it said 

while the proposal is to consolidate funding for the 18 programs 

into one new program, the administration intends the new program 

to offer communities broad flexibility in the use of the funds. So 

then I said, well maybe the underlying premise that everybody is 

lined up behind is broad flexibility in the use of these funds. 

I do not know what the underlying premise is that you are referring to, Secretary Gutierrez, on page six. The underlying premise 

of the President’s proposal enjoys diverse support. I have not heard 

any of it in this committee. I do not understand what that underlying premise is. Is it cutting funds? Is it job creation? Is it private 

sector participation? Is it broad community-based discretion? What 

is this underlying premise that we all are supposed to be lined up 

behind? 

Secretary GUTIERREZ. Congressman, the underlying premise is to 

do an even better job with the taxpayers’s money; to give it to those 

communities that really need it the most; to give it to those communities that are in transition that have been impacted because 

certain industries have been impacted; to give it to those communities and then to ensure and to help those communities improve 

their level of job creation; the level of economic growth; the value 

of real estate; the crime rate; performance measures; actual improvement in people’s lives. That is the underlying premise and we 

would like to work with this committee. 

Mr. WATT. And Commerce has more authority over that than 

HUD? 

Mr. NEY. The time has expired. If you want to answer that question, go ahead. 

Secretary GUTIERREZ. We have experience doing that, Congressman, yes. 

Mr. NEY. Thank you. 

The gentlelady from New York, Ms. Kelly? 

23

Mrs. KELLY. Thank you. 

I appreciate the presence of both of you here. I have been hearing from my communities in New York. They are frightened, quite 

frankly. They are in somewhat of a turmoil now because of this 

proposal and they do not really have any specifics on how they in 

particular will be affected. 

I am concerned about what your dialogue has been with America’s communities and what outreach you have done toward the 

communities that already have the CDBG monies and are using 

them. I am concerned about what their ongoing projects are going 

to be. I am concerned about the fact that I, in particular, do not 

seem to have specific proposals in hand. It is a controversial plan 

and I do not see specifics. So I wonder if you could address that, 

either one of you. 

Secretary GUTIERREZ. I will just say a couple of things, Congresswoman. First of all, I understand the nervousness because this is 

change, and change usually creates some anxiety. That is why we 

would like to develop the specific plan with the committee and with 

an advisory committee. We have not come forward with specifics 

because we felt we owed it to everyone to come forward with a concept where we can start from scratch, redesign this, that it really 

does benefit those Americans who need the money the most, and 

then work together so that we ensure that programs do not get left 

out, that communities do not get left out, that we do this in the 

best way possible. 

So that is really what is driving the proposal. I understand that 

change always generates anxiety, and that is why we want to work 

with this committee. But we have a great opportunity here. 

Mrs. KELLY. I understand that, sir, but I would like to know if 

you have procedures in place for consultation with states and communities that are already utilizing the CDBG monies, to get their 

ideas, their comments, their proposals, before you submit a detailed 

piece of legislation to Congress. Is that in place? 

Secretary GUTIERREZ. Yes, we are putting an advisory committee 

in place with representatives from communities, people who understand community development and economic development, and getting that input and getting the benefit of that as we develop the 

plan. I have tried to go out and visit some of the centers to actually 

look at first-hand where the money goes and to live it and to touch 

it and to feel it. I cannot say I have been to 100 places, but I have 

been to a few and I have tried to get out there and get a sense of 

this myself. 

So yes, we will work with those who want to work with us. We 

would like to have the benefit of your contribution and the benefit 

of everyone’s input. 

Mrs. KELLY. Mr. Jackson, I am concerned about what will happen with ongoing projects. What is being planned for them? Are we 

looking at a hard landing for them or a soft landing? Are you going 

to phase them out? Are you going to just simply cut them off? 

Secretary JACKSON. Congresswoman, I do not think we can phase 

any of the programs that are ongoing out. We have allocated the 

monies for 2005 for the Community Development Block Grant program. We also have some outstanding 108 loans that clearly we 

will have to take into consideration with any proposal that we deVerDate 0ct 09 2002 11:56 Oct 12, 2005 Jkt 000000 PO 00000 Frm 00027 Fmt 6633 Sfmt 6633 G:\DOCS\22764.TXT FIN1 PsN: MICAH
24

velop as to how we address those issues. I would think that in the 

future coming, yes, we would have to address those issues. 

Mrs. KELLY. But by implication, you are saying you do not have 

a plan at the present time to deal with this. Is that correct? 

Secretary JACKSON. Commerce is taking the lead in developing 

the plan and the legislation. We will serve to augment the development. I have had a number of conversations with Secretary Gutierrez informally about the plan. It is being developed now and we 

will in essence work with the Commerce Department as it is being 

developed. 

Mrs. KELLY. Mr. Secretary, are you going to allow Congress to 

have a look at this, are you going to work with us and do you intend to work with the communities to try to allow those people who 

are currently engaged with CDBG plans, things that they have 

started, they are going to need continuing money to finish, in all 

probability, some of these, do you intend to work with them? Have 

you got something in place, some kind of a structure in place to get 

these people together so that you can hear what they are saying 

and react and listen and take into consultation what they are saying, before you submit detailed legislation to us? 

Mr. NEY. The time has expired. 

Secretary GUTIERREZ. Yes, Congressman. We would work with 

this committee. We would work with communities. We understand 

that there are projects that are ongoing, and some of them are halfway completed; some of them are three-fourths of the way completed. We cannot just go in and chop off the project. 

Mr. NEY. The time has expired. 

Next is the distinguished gentleman, Mr. Clay from Missouri. 

Mr. CLAY. Thank you, Mr. Chairman and Ranking Member 

Frank. 

Mr. Secretary, I am not in favor of the transfer of CDBG from 

HUD to Commerce, and having said that for the record, I have a 

question that I asked Secretary Jackson the last time he was here. 

I, like most members of Congress, am deeply concerned by the 

drastic budget cuts of the CDBG program and the proposed shift 

of its jurisdiction and oversight from HUD to Commerce. 

I additionally have questions about whether the efficiency of targeting revenues from CDBG grants will be enhanced or diminished 

if such a transfer does take place. I represent St. Louis, and the 

statistics of poverty and lack of housing in North St. Louis qualifies 

the city for quite a large amount of money from HUD through the 

CDBG program. Yet, much of this money is never seen in North 

St. Louis and is sent downtown for other projects. We bring money 

into the city, yet the problems still exist. 

How do we better affect methods to get the money to the areas 

that produce the justification for the block grants? Although I do 

not favor sending the program over to Commerce, would this result 

in a much more efficient targeting of the monies than is presently 

practiced? What suggestions do you have that can result in a systematic targeting and then eliminating the housing problem in districts like North St. Louis? 

Secretary GUTIERREZ. We believe, Congressman Clay, that we 

should address that and that it is not right that if the money is 

being sent to St. Louis that it is diverted and does not reach those 

25

areas of the city that need it the most. The whole idea is to encourage and support projects that have long-term objectives, and performance metrics, and to make sure that those projects get all the 

support they need. 

I was just looking at statistics for St. Louis. You are absolutely 

right. It has a poverty rate that is above the national average. It 

is an area where we should be able to measure that. We should be 

able to look back once we start this program and have tangible results. That is what this is all about. We are trying to redesign a 

program to make it as efficient and effective as possible and we 

would like to do so with the help of the committee. 

Mr. CLAY. Well, if that is the case, I am willing to work with you 

in that respect. 

Secretary GUTIERREZ. Thank you, sir. 

Mr. CLAY. One more issue. In the First District of Missouri, we 

have tremendous problems with health care, brownfields redevelopment and many other areas addressed by CDBG. How will taking 

this program from the professionals in one agency and putting it 

with new personnel in another agency drastically reduce the monies needed, when it is already underfunded? How will that make 

the situation better, transferring it from HUD to Commerce? 

Secretary GUTIERREZ. Again, we do have experience working 

with communities to leverage private sector dollars. The Commerce 

mission is to work with private sector, work with local communities 

to enhance job creation, to enhance economic growth. That mission, 

that mindset, can be applied very powerfully to these grants so 

that we do end up with communities that are creating jobs, that 

are growing, that are more vibrant. 

Mr. CLAY. Thank you, Mr. Secretary. 

When your schedule allows, I would love to invite you out to St. 

Louis and show you around and show you some of the needs of the 

area of St. Louis that I represent. I sure would like for that to be 

sooner, rather than later. 

Secretary GUTIERREZ. Thank you. 

Mr. CLAY. Thank you. 

Mr. NEY. The gentleman yields back his time. 

The gentleman, Mr. Garrett? 

Mr. GARRETT. Thank you. 

And thank you, Mr. Secretary. 

I think generally speaking everyone up here is on the same page 

on at least one point and maybe two, and that is on the one point 

we are on the same page is we are all concerned about addressing 

the needs of the least fortunate. We may or may not be on the 

same page as to making sure that we do so in the most efficient 

manner, however. It seems as though you have been lambasted so 

far from both sides. 

On the one hand, it is suggested to you that you are being too 

detailed and coming to us with a program that is already in place 

and we have no in put on it. On the other hand, there are assertions by the ranking member that there is no detail in this program whatsoever and that is creating the confusion that is out 

there. 

And maybe that is part of the problem. The last point is true 

that we have confusion in the field because there are not the deVerDate 0ct 09 2002 11:56 Oct 12, 2005 Jkt 000000 PO 00000 Frm 00029 Fmt 6633 Sfmt 6633 G:\DOCS\22764.TXT FIN1 PsN: MICAH
26

tails, but I think that is appropriate. This is the committee that 

will be looking at it, and hopefully I personally would like to work 

with you to move it forward and making sure that all the input 

from the cities on up and the municipalities and rural areas on up 

get their two cents worth into the program. 

I think we all know of good programs back in our home districts. 

We have a program called Norwescap, a great program, works hard 

on a shoestring budget; brings together a whole bunch of programs 

and gets the job done. But I think if we are honest, we would also 

say we know a lot of programs that are not really getting the job 

done, in part because of how the program is set up now in Washington. 

I understand you have 35 programs out there under seven cabinet offices. Bob Ney has already mentioned that it is not getting 

the job done when we are putting 35 percent of the money less into 

those areas with the highest poverty rates. That is not getting the 

job done. 

The complexity of it, I was just looking at the one chart here, is 

just like anything else you will see here in Washington. The current program with all the cabinet offices up here and all the agencies underneath, all the program underneath, acronyms which I 

honestly do not know all of them, the NCDI, the CDEF, the RCF, 

the CDBG, the CDOS, the RHED. I can understand anyone back 

at home says, how do I get my program run when I have to deal 

with that mess, present company excluded, of course, in Washington? 

Then on top of that, we see that in PART, the program assessment rating tool, which rates out of the OMB all agencies of the 

federal government, most agencies, they looked at this, looked at 

most of the 18 federal programs that are slated for consolidation, 

and found that most of them are either ineffective or the results 

are not demonstrated. 

So I would hope that we could all get on the same page and say 

that we want to help the least fortunate; and (B), that we want to 

do it in the most cost-effective manner. 

Now, my question sort of goes around a different area, though. 

There was an article in Human Events a while back, last term I 

think it was, that raised the question to all department heads, all 

cabinet offices: Is your cabinet one that is constitutionally valid? Is 

there a constitutional basis for your programs? This issue is more 

than academic to me from New Jersey because New Jersey is a 

state that is, on the up-hand, the most affluent state in the country, but on the other hand, that is on average, I go back and get 

editorial board meetings all the time that say why aren’t you bringing enough of your own money back to New Jersey again? 

When you are an affluent state and you are looking at programs 

like this, we are not getting our own money back. We end up subsidizing the other 49 states all the time and in this program especially. So we do not get it back, and yet we do have a problem in 

our state. 

Although we are an affluent state, not everyone is affluent. We 

have poor people in our state. When you have the average cost of 

a house at $300,000, poor people, new immigrants to our state, 

27

they cannot afford that. They are coming together in little houses 

and three families are living there so they can get by. 

So programs like this may say, well, you are poor by a certain 

definition, but when it looks at a state like New Jersey that is affluent, well, we are not poor anymore because we are a rich state. 

So we end up subsidizing everybody else and not getting our ‘‘fair 

share’’ back at the end of the day. So I raise that question to you 

at the end. The first question goes back to how do we make this 

seem more local, but the larger question, the Human Events question, is there a basis for this? And how do I explain this back to 

my constituents on a fairness basis? 

Secretary JACKSON. Let me say this to you, Congressman. In 

1974, Congress wrote the law as to how the community development agency would work, how the Community Development Block 

Grant program would work. In that process, they talked about several factors: the distress factor of the community, the population, 

poverty, age of housing, and growth lag. They said take these into 

consideration as to how you fund the program. To date, that is 

what we have taken into consideration. 

So therefore as I gave you the example with Detroit just a few 

minutes ago, that in the city of Detroit it meets all five of these 

guidelines. So therefore, we are allocating about $50 per capita in 

the city of Detroit. But Oakland, in many ways like New Jersey, 

is a very affluent suburb, so we allocate about $6 per capita because even being an affluent suburb, they still have pockets of poverty. They have housing that is pre-1940. So therefore, we still 

have to address that situation. 

Mr. NEY. The time has expired. 

Secretary JACKSON. What we have done to date because of the 

PART score that we have, again I reiterate it, I empanelled people 

from the profession, from the industry and OMB. We completed an 

analysis and we have submitted to you four scenarios for your consideration as to how best to address the issue that you just said. 

It is up to Congress now, this committee, to analyze those four scenarios that we gave you. 

Even if the program goes to Commerce, I think it is still important to analyze those scenarios as to how you think the program 

of those four should best work. That is the way I think that it came 

about in 1974 when now Secretary Mineta was in the Congress and 

helped write the present legislation that we operate under now. We 

are giving back to you based on what was asked of us scenarios 

that you can decide how and how best the program should be administered. 

Mr. NEY. The time has expired. 

The gentleman, Mr. Scott of Georgia. 

Mr. SCOTT. Thank you very much, Mr. Chairman. 

I must admit that I am having some serious, serious issues over 

here as to the big why. Now, we are getting hit two ways here. 

First of all, these critical programs are being cut in funding in 

housing and community development by 35 percent. Then you are 

taking the remnants of those, 18 programs, and shifting them away 

from the agency with the heritage, the tradition, the experience of 

working with these programs, whose total mission is affordable 

housing and effective community development, and shifting them 

28

away from that over to the Commerce Department which has no 

expertise. And to say that this is done in the interests of efficiency 

makes a big why to me. 

Secondly, this has got to be a total loss of confidence in you, Mr. 

Jackson, and your department, to take these vital programs from 

your agency, from you. You are far more qualified from my estimation, no disrespect to the Commerce Secretary, on these issues, 

with your background in housing in Texas, in Houston, I believe. 

You have come up through the ranks, and you are sitting there and 

seeing these programs cut out from under you in the interests of 

they can be better done over here. 

I think that is a slap in the face to you and to HUD, which we 

have had many problems with, but it is clearly the agency where 

these programs belong. With all due respect, they do not belong in 

Commerce. The question has to be answered. The American people 

are expecting an answer. Why? In the face of this, the Commerce 

Department does not have any expertise in brownfields. The Commerce Department does not have any expertise in community block 

grants, affordable housing. What about the transition costs that are 

involved in transporting these services? 

We need to really come clean with this. Is this a way of killing 

the block grants softly? Something is rotten in the cotton here. 

There are nine categories of eligible activities authorized by Congress under the CDBG program. Most of these categories are related to housing or property. Do you mean to tell me that the Commerce Department has more experience than the agencies that 

have been handling this, with housing and property development, 

to adequately assist local communities and their community development needs? 

There is something not right with this move. Could you respond? 

Secretary JACKSON. I will be happy to, Congressman. Let me say 

this to you. I would disagree with you paraphrasing this as for inefficiency purposes. I do not think that is the basis that this is occurring. There is inefficiency in every government program. 

Mr. SCOTT. Well, why do you think they are taking these programs from you? 

Secretary JACKSON. May I finish please? My understanding, and 

I still endorse the concept, is for consolidation. Yes, I do believe 

that the economic development programs should be in one place, 

and I stick to that premise. I do not perceive it as a slap in the 

face to myself or to HUD. 

As I said to you before when you asked basically the same question in the previous meeting, we made our logical argument as to 

why we thought it should stay at HUD. It was not. I support the 

concept then as now that we should consolidate the programs, not 

because of inefficiencies, not because of something that the programs have done wrong. I think they should be housed in one place 

so they can be administered by one administrator. I do not in any 

way backtrack from that. 

Mr. SCOTT. Mr. Jackson, do you approve of these cuts in the 

CDBG program? 

Secretary JACKSON. I do not know of cuts. I know that I zeroed 

out of my budget $4.5 billion. 

Mr. SCOTT. Do you agree with those cuts? 

29

Secretary JACKSON. I am not sure what you are asking me if I 

agree with, Congressman. 

Mr. NEY. The time has expired. 

Mr. FRANK. Would the gentleman yield? The number in the 

budget is $3.7 billion for CDBG and everything else, not $4.5 billion even. 

Mr. NEY. The time has expired. 

Mr. Miller, the gentleman from California. 

Mr. MILLER OF CALIFORNIA. Welcome, Secretary Gutierrez. I 

have not had a chance to really talk to you or hear you in the past, 

so it is good to have you here. 

I know, Secretary Jackson, last time you were here, you thought 

you were going through a divorce, and everybody loves you today. 

What a change a day can make. 

[Laughter.] 

It really is. Everybody has a right to come up with an idea. I am 

looking forward to seeing what your final proposal is going to be 

on this because you are here talking today. You are not here cast 

in concrete. You are here I think asking for some direction and advice on what we would like to see happen. Rarely do I hear anything from our cities as unanimous as I have on this issue here. 

One of the things that bothers me, and I listened to Mr. Frank 

when he spoke also, and we are going to target the highest levels 

of poverty. The problem I have with that, because somebody who 

might be low income in a high-cost area might not necessarily be 

low income in an area full of poverty, but they both have needs. 

That is a concern for me. 

The concept of starting from scratch, if we have waste, fraud and 

abuse, I think we need to absolutely deal with that. I agree with 

you 100 percent. There needs to be accountability. We need to 

eliminate any outdated or unneeded programs. I am with you on 

all of that. 

I come from a 30-some year experience as a developer and builder out there. I just look at economic development and community 

development as two different issues. In my industry, they are 

looked at two different issues. I have really enjoyed both your answers because I am impressed by both of you. 

I think you do a very good job in Commerce, and I have listened 

to your answers because you have a strong background and your 

expertise is that, economic development. I support that for communities. When my communities go out and they are trying to encourage economic development, they are working on shopping centers 

and bringing revenues into the city so they can provide the infrastructure and make the community better overall. 

But when my communities are going out and doing community 

development, it is a different issue altogether. The people I am concerned about in my district, because they do not fall into the highest level of poverty, are those that are low income, seniors specifically even in my area that need mitigation for building safety programs, deficiencies they have, violations, senior programs, physical 

mobility that we provide for in our communities, nutrition, meals 

on wheels, which CDBG funds in our communities, and the YMCAs 

which do a good job helping low-income mothers who are out workVerDate 0ct 09 2002 11:56 Oct 12, 2005 Jkt 000000 PO 00000 Frm 00033 Fmt 6633 Sfmt 6633 G:\DOCS\22764.TXT FIN1 PsN: MICAH
30

ing and have a place for their kids so they can go to. That is all 

subsidized by CDBG. 

I guess my concern is, Secretary Gutierrez, I think you have the 

expertise to try to build that strong engine in an economy which 

provides jobs, does benefit communities. And Secretary Jackson, I 

remember of you last time getting beat up a little bit, and I 

thought you and I were just best old buddies because we were 

agreeing on most everything, and I think you have done a good job 

in what you do, too. 

So I like both of you, and I am in a problem here, because I have 

two individuals with expertise that are great in what they do, and 

we are going to mix them. That kind of bothers me. I am going to 

look at what you come up with at the end, but that in itself bothers 

me because I have listened to your responses and both of you, I 

give you high marks in what you do because your responses are 

based on your expertise. I think you are great, both of you, but 

when we mix them, I have a problem. 

Now, Secretary Jackson, having been Chairman of two community development agencies, what is your assessment of CDBG 

today? 

Secretary JACKSON. Today, it is good. If I stood here and told you 

that the Community Development Block Grant program has not 

worked in this country, I would be very hypocritical in the sense 

that I was Chairman of the community development agency in St. 

Louis and the community development agency in Washington, D.C. 

I can point to several projects that were done with CDBG money 

that are an absolute success. 

Mr. MILLER OF CALIFORNIA. So we are finding it might be necessary in some areas? 

Secretary JACKSON. I am sorry? 

Mr. MILLER OF CALIFORNIA. From your findings and application, 

it might be necessary, and I am with you on that. I agree with your 

response. 

Secretary JACKSON. I think, Congressman, what I said to you 

was when we walked in here we had $370 million with 309 cities 

in backlog. There is no question. Today, we have 50 cities with $25 

million. 

Mr. MILLER OF CALIFORNIA. You have given me my response. 

You are doing a great job. I love you. I am going to get to him because I am going to run out of time real soon. 

What tools or institutional models do you have at Commerce that 

they do not have? 

Secretary GUTIERREZ. I just want to follow up. 

Mr. MILLER OF CALIFORNIA. I am not trying to cut you off, Mr. 

Jackson; you know that. 

Secretary JACKSON. That is fine. 

Mr. MILLER OF CALIFORNIA. My light is going to go red any 

minute and I am going to be dead. 

Secretary GUTIERREZ. Congressman, I would like to say that the 

problem is not HUD, and I would agree with Secretary Jackson 

about the people within HUD and the commitment and the passion 

they have. 

Mr. MILLER OF CALIFORNIA. No, I never said there was. That is 

not the question, yes. 

31

Secretary GUTIERREZ. They do great work. The problem is the 

system. We have 18 different programs with 18 different evaluation 

techniques, 18 different ways of accessing the money. Some have 

measures, some do not. So it is the system that we are trying to 

correct, and it is not any kind of indication that HUD has not done 

a good job. I want to make that clear, because we have a great deal 

of respect for the people at HUD. 

We are talking about what we can do better. We are saying that 

if we all get our heads around this, we design a system from 

scratch that is better and can do better for our people. 

Mr. NEY. The time has expired. 

Mr. MILLER OF CALIFORNIA. As a supporter of Commerce and 

HUD, I would love to spend more time talking with you. You have 

an expertise in both of what you do. But I am concerned, and I am 

not against either one of you. I am just concerned. 

Mr. NEY. The time has expired. 

The gentlelady from California, Ms. Lee. 

Ms. LEE. Thank you, Mr. Chairman. 

First, thank you both for being here and laying out this concept. 

You indicated earlier that you did not really have a plan yet and 

that this is just a concept. Well, I think you have heard from both 

Democrats and Republicans on this, from people around the country. It is a bad concept. So I do not know why you just do not go 

back to the administration and say to them it is a bad concept; it 

has very little support; and forget it. Because there is no way that 

this concept should be developed into a plan. 

First of all, do you know, several years ago there were signs that 

this administration wanted to dismantle HUD. I think this probably is one of the major steps in getting rid of HUD. Many of us 

believed then as we believe now that HUD is an agency that provides really for the least of these. 

And given the values, agenda that you all have, it boggles my 

mind to believe that you could now transfer this into the Department of Commerce. I said this to you earlier, Secretary Jackson, 

that it does not reflect the values that say that we care about those 

who are most in need in our country. 

What kind of, and I am asking you Secretary Gutierrez, what 

kind of track record do you have with people who are living with 

HIV and AIDS and who need housing, or with the disabled? I know 

HUD has proposed all these huge cuts to the disabled and to those 

living with HIV and AIDS as part of their overall budget. So I need 

to get a handle on how in the world Commerce is going to manage 

and put forth some of these initiatives that you all do not have, 

quite frankly, a clue about. 

Secretary GUTIERREZ. The concept here, Congresswoman, is to do 

a better job with the money the taxpayers have given us. As we 

look back and look at communities that have received millions and 

millions of dollars over the years, we have seen poverty rates that 

are increasing. The money that has been invested in these communities has not generated results. We believe that we have to do better. 

Ms. LEE. Do you have anything that shows that the Department 

of Commerce has helped to reduce poverty rates and knows how to 

32

provide services to those living with AIDS and senior citizens and 

the disabled communities? 

Secretary GUTIERREZ. We have in our EDA grants which granted 

is smaller, but we do have experience in working with economic development and community development metrics. We can show you 

examples of communities that have increased their job creation, 

where economic growth has improved. We believe that due to the 

right thing for a community, that that should translate eventually 

to better jobs, more jobs, higher real estate values, a better quality 

of life. 

Ms. LEE. Sure, maybe eventually, but right now we are talking 

about right now. The CDBG has created, what, at least 90,000 jobs 

last year; housing, rehabilitation for housing, the services that 

CDBG provides as an adjunct to economic development. What in 

the world does Commerce know about doing this? 

I understand what consolidation means, but when you are going 

to abandon a mission that HUD has in terms of being really the 

only agency, if you asked me, that has as part of its mission to ensure a safety net and ensure that the least of these are at least 

provided some kind of government focus. You know, it is an effort 

I think to just get rid of those people and let them fend for themselves. 

Secretary GUTIERREZ. We are deeply committed to improving the 

lives of everyone. Our mission is around creating jobs, creating economic growth, having tangible results for people. We believe we 

owe that to people and we owe it to them to use taxpayers’ money 

more efficiently. 

Ms. LEE. So Secretary Jackson, you do not owe that to people 

anymore, out of HUD, as it relates to the CDBG? 

Secretary JACKSON. Of course, and we will continue to do that. 

Ms. LEE. How are you going to do that, when you proposed, first 

of all your cuts that you proposed; and secondly you said you had 

debated the concept and you lost, they won. Well, why don’t you 

go back and debate it some more and say this is a democracy. 

There is no support for this out there in America. 

Secretary JACKSON. It is not a win or lose situation. As I stated 

before, I see it as consolidation. Secondly, HUD is still in place. We 

are still operating. 

Ms. LEE. But you are dismantling a huge portion of HUD right 

now. Next year, you will dismantle the rest. Trust me. 

Secretary JACKSON. We are not dismantling. 

Ms. LEE. Yes, you are. 

Secretary JACKSON. No, we are shifting resources. 

Ms. LEE. You are getting rid of HUD. That is what you are 

doing. You are dismantling it and next year we will see you nail 

the coffin shut, with your support. 

Mr. NEY. The time has expired. 

Mr. Pearce? 

Mr. PEARCE. Thank you, Mr. Chairman. 

Mr. Jackson, nice to see you after your visit to New Mexico with 

me. 

Secretary JACKSON. Thank you. 

Mr. PEARCE. Mr. Gutierrez, we look forward to that. 

33

I would like to associate my comments with Mr. Clay from Missouri who commented that many times we send funds to very poor 

areas and those funds are diverted along the way. Our office, for 

one, has told our communities if we ever get your money for a 

project and you do not use it for that, we will never ask again, 

never. So I appreciate having you all come to this situation with 

us. 

As I listened to the discussion, I am a little amazed. You know, 

we are talking about shifting functions and we as a Congress just 

had a great national discussion on revamping and in fact changing 

the way we gather intelligence. And yet we are concerned here 

about the shifting of functions. I swear I thought I was hearing a 

converted Republican talk, because he talked about unelected officials who are rewriting the Constitution and rewriting programs 

without authority. And I was sure he was talking about the judiciary, which we talk about all the time, taking constitutional functions. But just as he fell into a dead faint, he declared it to be the 

administration instead. 

Who is going to look over the functions, the state or the federal 

government, of the SAC program? Who would administer that, the 

federal agency or state agencies? 

Secretary GUTIERREZ. Overall, obviously the money is federal 

money, but the management of the programs and the accountability for the programs should be at a local level. 

Mr. PEARCE. You bet. Okay, I appreciate that. Again, we are basically doing that in our office. We are asking the communities to 

prioritize their needs and then we simply see if we can get the dollars. Everyone always talks about local control until we actually set 

about doing it. So I appreciate that. I appreciate the ideas of eliminating duplication and expanding flexibility. 

For rural areas, we are very concerned with how much actual 

funding that we might lose. Do you have a spread sheet showing 

how much funding actually would go through the system compared 

to what it is right now? I suspect we are going to lose a lot of duplicative functions, a lot of administrative function. So I am thinking 

that the water at the end of the pipeline, the money out the end 

of the pipeline might actually be the same or more, frankly. 

Secretary GUTIERREZ. We do not have numbers for rural areas, 

although we believe that if we apply criteria that would force the 

money to go to those areas most in need, that that should surface 

more rural communities. 

Mr. PEARCE. Thank you. The current assessment tools for CDBG, 

who administers those and are those assessment tools going to be 

carried through? Or have those assessment tools maybe have not 

worked? I do not know. 

Secretary GUTIERREZ. We would manage the assessment tools, 

performance metrics at Commerce, with local communities in the 

programs. I am sure that OMB would continue to evaluate our 

work the way they evaluate the use of federal money across the 

system. 

Mr. PEARCE. Again, I appreciate the idea of accountability, because I have listened to a very shrill debate on No Child Left Behind in our state and the teachers declaring that the accountability 

was going to be the end of education. Yet in the last school that 

34

I visited, the increase in reading scores was 28 percent; the increase in math scores was 26 percent. And the poor, that is free 

and reduced school lunch programs, those kids are up almost 50 

percent. So No Child Left Behind, with a little bit of accountability, 

is actually directing the money very well and I suspect that we are 

going to do the same thing. 

I think my last comment, Mr. Chairman, has to do with the economic discussion that was had. You know, American jobs are under 

fire and at risk of going overseas to countries that are subsidizing 

entire economic climates. They have a culture of maybe no regulation and we are competing with that. American technology is being 

stolen and then being used to turn around and give jobs to foreign 

countries instead of U.S. countries. Our intellectual property is 

being taken away. The American worker is competing with workers 

who are making dollars per day instead of dollars per hour. In 

short, our nation is fighting for its economic life. 

Mr. Gutierrez, I am proud to have you on the team because we 

must win this battle. It takes more than shrillness in this room 

and it takes more than harsh comments for the American economy 

to survive because we are under attack from every other nation. 

The enemy is not on the other side of the aisle in this body. The 

enemy are those who would take our jobs and transport them. 

So I appreciate having you all, and I appreciate the thorough 

look that you are giving this. I look forward to working out the parameters, but if you could get me those spread sheets showing the 

reduction of funding, I would appreciate it. 

Secretary GUTIERREZ. Yes, sir. 

Mr. NEY. The time has expired. 

The gentleman, Mr. Moore from Kansas. 

Mr. MOORE OF KANSAS. Thank you, Mr. Chairman. 

Secretary Jackson, recently I received a letter from the Johnson 

and Wyandotte Counties Council of mayors. Those are the two largest counties in my district, that comprise probably 85 percent of the 

population of my district. We are right across the line from Congressman Cleaver, who asked you some questions earlier. 

I received a letter expressing their apprehension about the proposed changes. The Council worries, and this is a quote from their 

letter, ‘‘a 35 percent cut in economic development spending for fiscal year 2006, coupled with the transfer of the CDBG program to 

an agency unfamiliar with its mission will immediately undermine 

local job creation, antipoverty and revitalization efforts in communities across America.’’

I wondered, Secretary Jackson, is you have heard that the 

United States Conference of mayors has denounced the cuts that 

are presented in the President’s proposal? 

Secretary JACKSON. Yes, I have. 

Mr. MOORE OF KANSAS. And have you also heard the National 

Association of Counties have denounced the cuts in the same manner? 

Secretary JACKSON. Yes, I have. 

Mr. MOORE OF KANSAS. The fiscal year 2006 budget request of 

$3.71 billion for the program represents a 35 percent cut in funding 

compared to the fiscal year 2005 level of $5.665 billion. The proVerDate 0ct 09 2002 11:56 Oct 12, 2005 Jkt 000000 PO 00000 Frm 00038 Fmt 6633 Sfmt 6633 G:\DOCS\22764.TXT FIN1 PsN: MICAH
35

posal would mean a $1.16 billion cut in funding for affordable housing in our communities. 

On March 12, I had a press conference in my district with seven 

mayors and the Chairwoman of the Board of County Commissioners. Most of these folks in my district, frankly, are in the President’s party and I am sure voted for the President as well, but they 

are very, very concerned about these deep cuts in this program. 

I want to read to you just a very short couple of paragraphs from 

a Kansas City Star article that appeared after our press conference. In Prairie Village, seven Kansas mayors and other public 

officials from Johnson and Wyandotte Counties said the areas stood 

to lose vital safety net funding. ‘‘CDBG money is not about urban. 

It is not about rural. It is about people,’’ Annabeth Surbaugh, 

Chairwoman of the Johnson County Commission said in a news 

conference held by Representative Moore. ‘‘It seems like when the 

feds do a shift in funding, we get the shaft.’’ She is very 

plainspoken, but that is what Chairwoman Surbaugh said. 

I have the same kind of concerns because I do not want to see 

a program which really has developed communities and helped people in our country have the funding cut so much that it ends up 

hurting communities and people. You can call it whatever you 

want. We can say Strengthening America’s Communities, but if we 

are actually hurting communities and hurting people in this country, we are not doing a service for our folks. 

I tell people, and I really mean this, this should not be about 

Democrats and Republicans. This should not be about partisan politics at all. This should be about helping our country and our people. I want to just read one more statement from Chairwoman 

Surbaugh. She said, ‘‘Without the grants, homes deteriorate, neighborhoods crumble, and the social fabric of a community begins to 

fray.’’

I have those same concerns because I, number one, believe that 

these funds have helped our country and our communities and our 

people as much as about anything we have done. I just hate to see 

it, I cannot believe that the mayors and the county commissioners 

around this country are all so wrong. I certainly want to see the 

details of your proposal and I hope you will get that to us as soon 

as possible, the other Secretary, Mr. Gutierrez, if you would please. 

Secretary GUTIERREZ. Yes, sir. 

Mr. MOORE OF KANSAS. What do you say to the mayors, either 

one of you? What do you say to the mayors and what do you say 

to the county commissioners in this country, almost unanimously, 

not unanimous, but almost unanimously who have denounced these 

cuts and are very concerned about the transfer of the program from 

HUD to Commerce? 

Secretary GUTIERREZ. Congressman, a little while ago someone 

mentioned that it would be very arrogant on our behalf to come forward with a very detailed plan, without taking into account the 

input, the very valuable input of this committee. So what we have 

brought forward is an idea, a passion for doing a better job with 

taxpayers’s money, and working with the community, working with 

other constituents to come up with a better way. 

36

Mr. MOORE OF KANSAS. Have you talked to the National Association of Counties? Have you talked to the National Council of mayors about your proposal? 

Secretary GUTIERREZ. Personally, I have not. I have had some 

meetings with some mayors. 

Mr. MOORE OF KANSAS. Secretary Jackson, have you, sir? 

Secretary JACKSON. Yes, I have. 

Mr. MOORE OF KANSAS. Who have you talked to, sir? 

Secretary JACKSON. I spoke to the U.S. Conference of mayors and 

the National Association of Counties. 

Mr. MOORE OF KANSAS. Did they express the same concerns that 

I have related here today? 

Secretary JACKSON. Yes. 

Mr. MOORE OF KANSAS. And you have not, Mr. Secretary? 

Secretary GUTIERREZ. No, but we would like their point of view. 

We would like them to help us because it is somewhat easy to say 

no. It is a little bit harder to get our heads around how do we do 

a better job with taxpayers’s money and figure something out and 

figure out a new design. 

Mr. FRANK. Would the gentleman yield? 

Mr. MOORE OF KANSAS. Yes, sir. 

Mr. FRANK. I would just say on behalf of the Democratic side, I 

have checked with the subcommittee Ranking Member’s staff and 

our staff, we have certainly not received anything. You said you 

wanted to work with the committee. I am not aware of any requests from either department for us to begin to talk about this. 

Secretary Gutierrez asked if we could have met yesterday and I 

apologize for the fact that we could not. But there has been no request for any consultation or input that I am aware of to the Democratic staff. 

Mr. NEY. The gentleman from Texas, Mr. Hensarling? 

Mr. HENSARLING. Thank you, Mr. Chairman. 

Mr. Secretary and Mr. Secretary, welcome. If I understand this 

initiative properly, I wish you would have showed up here about 

10 or 20 years ago, but better late than never. Secretary Jackson, 

always good to see you again, sir. You clearly are one of the most 

qualified individuals who has ever served in your office, and certainly your reputation precedes you. 

I want to talk a little bit, since we have heard how popular the 

CDBG program is, and indeed it is popular with a number of mayors and city and county officials in my district in East Dallas and 

East Texas. But at the same time, I know that any program that 

essentially is handing out free money is going to be a very popular 

program. But that program, not unlike any other program we have 

here, has opportunity costs. Every dollar that goes into CDBG is 

a dollar that cannot be used to save Social Security. It is a dollar 

that cannot be used to reduce the debt that my children one day 

are going to inherit if we do not reform a number of these programs. 

So my question is, Mr. Secretary, given all of your experience, 

and I know of a number of individual projects that CDBG funds 

have been used on that are quite good, but in an overall, macroeconomic sense, when we pour all this taxpayer money in on one 

end, how are we measuring success on the other end besides the 

37

fact that we are going to spend more money next year than we did 

last year? How do I evaluate that the taxpayers are getting good 

value for their investments? And the recipients, how do we know 

that we are really doing anything to alleviate the blight in their 

neighborhoods or create economic development? 

Secretary JACKSON. Congressman, I think that is a very fair 

question. Let me say this, I go back to 2001, 2002, with the evaluation that was done by OMB. In that process, they denoted a number of problems that existed in the program, and that they wanted 

outcome measures that we could statistically say that the program 

is working. What I did after that, as Deputy Secretary, is went to 

the secretary, at that time Secretary Martinez, and said we have 

to respond and we have to begin to be proactive as OMB has said. 

So we empanelled professionals from the community development area, the industrial leaders, and members from OMB who 

worked side by side for the last 14 months to address exactly what 

you have just said, to measure the outcomes. What we did in that 

process is we completed the analysis and we submitted to you and 

this committee four alternates that can be used to address many 

of the issues that you said. 

Let me say this, because it is important. I am pleased and I said 

it then and I say it now, that OMB came and made the evaluation 

because we would not at HUD be as far along as we are in finding 

remedies for the problems that we have in the Community Development Block Grant program. Yes, we can clearly say that there 

are communities that have been absolutely successful, and I do not 

doubt that, because as I said earlier, if I had to speak about it, I 

can tell you a number of programs in St. Louis and right here in 

Washington, D.C. that I oversaw that are doing extremely well. 

But without measured outcomes, that is a problem. I think that 

if you review the alternates that we sent to you, we have addressed 

the issue specifically about communities and how we have a disparity in some communities versus others, as Secretary Gutierrez 

has said. We have addressed that issue. 

We have also addressed how do you measure this in a metric system to make sure that we can document that these programs are 

working. I think that in many cases we are in the process we have 

been doing for the last two-and-a-half years, and we will continue 

to do it as long as we have the program. If the program is at Commerce, we will work with them to set up those same metrics so we 

can continue to measure. 

Mr. HENSARLING. Thank you, Mr. Secretary. My time is starting 

to run a little short here. 

Secretary Gutierrez, in your testimony, you include some fairly 

radical notions for inside the beltway. Number one, that we should 

use the best tools available to actually see if we are achieving benefits to those we have pledged to help; that we can actually consolidate programs and get more with less; that we should target resources to those who need it the most. Again, these are not radical 

concepts outside of the beltway. 

Unfortunately, to some extent, they are radical inside, particularly the idea that we can get more with less. I know you were a 

Fortune 100 CEO. When you were at Kellogg’s, did you ever have 

18 HR departments or 18 CFOs or 18 marketing departments? And 

38

if you did, did you reach the point of diminishing margin of utility 

where you could have gotten more with less? 

Secretary GUTIERREZ. Yes, Congressman, I think that is an excellent point. It would be a little bit like having 18 sales departments. 

That is why I say the problem is not HUD; the problem is the system. If we can focus on creating and designing a new system, we 

would do a great job for our taxpayers around the country. 

Mr. NEY. The time has expired. 

Mr. Crowley of New York? 

Mr. CROWLEY. I thank the Chairman and thank both secretaries 

for being here today, especially Secretary Gutierrez, who’s from 

Flushing, Queens, the town that I come from. So welcome. 

I welcome Secretary Jackson as well. 

I think it is fair to point out, my colleague from Texas had mentioned that dollars that are put towards Community Development 

Block Grants are dollars that potentially could be use to save Social Security and some other laudable programs that I think the 

federal government now supports. I think it is also fair to say that 

for every cut that is made in Community Block Grant or in HUD 

or in Commerce is another dollar that can be given towards the tax 

cut for the wealthiest 1 percent in this country is wrong. I think 

it is important to put that on, at least for my purpose, on the 

record as well. 

Mr. Jackson, I am going to ask you a question. It may sound very 

rhetorical, but it is a real question. Does this administration believe that in public housing that fighting drugs is a priority? 

Secretary JACKSON. Yes. 

Mr. CROWLEY. It does. I ask the question because several years 

ago, this administration eliminated the drug elimination program, 

also known as DEP and told housing authorities around the country to use their capital or operational funds to continue the good 

and successful works of DEP. Are you familiar with that? 

Secretary JACKSON. Yes. 

Mr. CROWLEY. As an aside, I am the son of a police officer in 

New York City for 22 years. I grew up around a lot of police officers. I know for a fact the NYPD has said that the DEP funds were 

vital in their fight against drug use in public housing. But this 

year, the New York City Housing Authority, the largest of its kind 

in the United States, is dealing with a $50 million slash to its 

budget. They can barely maintain their voucher program, let alone 

or operate the DEP program. 

So my question is, where is the money? If the administration 

truly wants to be a partner in preventing drug abuse in public 

housing, where is the commitment by this administration towards 

that end? 

Secretary JACKSON. Congressman, let me say this, that when the 

drug elimination program was eliminated in the budget, it was not 

effectively eliminated. What HUD did at that point and Congress 

did at that point is it was the budget at that time for drug elimination was somewhere I think about $525 million. 

What they effectively did is told the housing authorities that 

they could utilize the monies that had been allocated for drug 

elimination for either capital improvement or continue to use it for 

drug elimination. They just did not call it drug elimination. 

39

They put about $490 million of the $525 million, if I remember 

correctly, back into the budget. Housing authorities that had been 

utilizing it for that, continued to utilize it for that. Dallas is one 

of those housing authorities that I can specifically tell you that. Let 

me tell you why it was eliminated, because in many cases about 

78 percent to 80 percent of the housing authorities, even when they 

got their drug elimination monies, were not using for that purpose. 

So rather than continue the facade, Congress and HUD made the 

decision, why don’t we just give it to them and if they choose to 

use it, they will use it. The last part that you said, we just put $1.4 million back into the operating budget. We put $1.1 million back into the Section 8 

budget to make sure that we address the needs of places like New 

York City and others. If there is a shortfall at this point, I am just 

not aware of it. We did increase the budget this year and for next 

year in 2006. 

Mr. CROWLEY. You brought up Section 8. Let me just address 

that for a moment. I have a housing complex in the Bronx, a housing unit in the Bronx that is 100 percent Section 8 housing. There 

has been some discussion about a new owner for that building who 

has not accepted Section 8 housing in the past. He has indicated 

to the people in that building that he will not accept Section 8 

vouchers in the future. I brought this to the attention of the Ranking Member. Since you are here in front of me today, have you 

been hearing such stories around the country. 

Secretary JACKSON. Yes, we have. 

Mr. CROWLEY. And what do you plan to do about that? 

Secretary JACKSON. If they are not budget-based vouchers and 

certificates, there is nothing we can do. 

Mr. CROWLEY. So basically those individuals who cannot afford 

to stay there will go where? 

Secretary JACKSON. They will be able to take their vouchers to 

other housing developments. 

Mr. CROWLEY. Where in New York City can you do that? 

Secretary JACKSON. I cannot tell you. I do not live in New York 

City. 

Mr. CROWLEY. I don’t know where else you can do that in any 

other part of the country that has public housing either. 

I listened to what you said. You know, cuts are going all across 

the board here, city, state and federal as well. You have gone from 

$5.7 billion to $3.7 billion in CDBG; $4.1 billion in HUD alone, 

down to $2.6 billion, a drastic cut. My colleague asked you before, 

Mr. Scott, whether you agreed with the cuts. You implemented 

them, but do you agree with them? You did not answer his questions. I wonder if you could answer it now? 

Secretary JACKSON. What I said to the Congressman then and I 

will say it to you, we zeroed out of our budget $4.5 billion. 

Mr. CROWLEY. Did you agree with that is what he asked you. 

Secretary JACKSON. Yes, I do believe that. 

Mr. NEY. The time has expired. 

Mr. CROWLEY. I appreciate that. Thank you. 

Mr. NEY. The gentleman, Mr. Frank. 

Mr. FRANK. Mr. Chairman, there has been a lot of conversation 

about consultation. We have been told that the reason there are no 

40

specifics is that they want to leave room for consultation. I must 

say, I do not think that is the reason. I think there is no consultation because this idea has not been taken seriously at any level. 

Let me just ask, Mr. Secretary, who is writing the bill? Secretary 

Gutierrez, is the bill now being written? 

Secretary GUTIERREZ. We are in the process. 

Mr. FRANK. Who is ‘‘we’’? Who is writing it? Who is writing the 

bill, which agency? 

Secretary GUTIERREZ. We are writing it within Commerce and we 

plan to have a bill, a preliminary bill to you in late April. 

Mr. FRANK. Okay. The Department of Commerce is writing it. 

Secretary GUTIERREZ. I will find out specifically. 

Mr. FRANK. Okay. I do not mean a name. I mean the agency. 

Secretary GUTIERREZ. Yes. 

Mr. FRANK. We have had no contact, those of us on the Democratic side, at least, have had no request for input or anything else. 

In fact, I rarely see such unanimity from people. There was some 

suggestion this was an inside the beltway thing. Well, that would 

be true only if the beltway were described as consisting of the Atlantic and Pacific Oceans, Canada and the Gulf of Mexico, because 

there is a nationwide rejection. 

I have been asked today to submit material from the National 

Association of Housing and Redevelopment Officials and local officials, and I would ask unanimous consent that all these be put into 

the record. 

Mr. NEY. Without objection. 

Mr. FRANK. In conclusion, the President’s Strengthening America’s Communities proposal may have a pleasant sounding name, 

but it represents an unprecedented reversal of the covenant relationship between the federal government and states and localities. 

It is a profoundly disturbing retreat from a responsible federal 

community and economic development agenda. 

On behalf of the National Association of Federal Credit Unions, 

I want to share our concern regarding the proposed changes. The 

National Association of Federal Credit Unions opposes moving the 

CDFI, the Community Development Financial Institutions, which 

we have jurisdiction over. The National Association of Federal 

Credit Unions opposes moving the fund to the Commerce Department and urges Congress to continue the fund at $80 million level. 

The Coalition of CDFI Organizations, community development financial institutions, including a lot of banks and a lot of private 

sector activity groups, also ask that I submit their statement expressing their very strong opposition to this program. 

I do not know of any of the agencies that are involved at the local 

level in administering this, private citizens, elected officials, appointed officials, financial institutions. I do not know any that are 

for this. ‘‘Under the proposed block grant structure, CDFIs would 

lose the ability to apply directly to the federal government for targeted investments. The important role that modest federal dollars 

play in allowing CDFIs to attract private sector investment would 

be lost under the new proposed structure.’’

Now, there will be a lot more. Let me ask you, Secretary Gutierrez, if this proposal goes through and the bill that your department 

is writing, how much of CDBG will be available for housing? How 

41

much of the new program will be available for help in the construction of housing? 

Secretary GUTIERREZ. As I mentioned before, the overall funds 

would be cut by 4 percent. 

Mr. FRANK. I understand that. But in the new rules, would housing be a fully eligible activity or would it be a restricted activity? 

Of the reduced amount of money available, because that is one of 

the concerns since CDBG is now used for housing, how much of 

that would housing be eligible for use under the new program as 

it is under the existing one? 

Secretary GUTIERREZ. That will depend on the specific program 

and the specific——

Mr. FRANK. I understand, but you are writing it. What do you 

mean, ‘‘it depends on’’? You are writing it. How are you going to 

write it? 

Secretary GUTIERREZ. We would be writing eligibility criteria. 

Mr. FRANK. Do you plan in the bill, I understand it will come to 

us, but in the bill that your department is writing, what is your 

intention regarding housing? 

Secretary GUTIERREZ. Our intent is to improve the economic conditions at the local level. 

Mr. FRANK. Excuse me, Mr. Secretary, that is not what I asked 

you. You have learned quickly how to dodge questions. I congratulate you. 

In the bill that you are writing, will housing be a fully eligible 

use for these monies to the extent that it now is or not? 

Secretary GUTIERREZ. To the extent that that helps a local community improve their economic conditions, yes. 

Mr. FRANK. So if they decide that housing is good for the local 

economy, they could use the money for housing? 

Secretary GUTIERREZ. It depends on the specific proposal. 

Mr. FRANK. You are going to approve the specific proposal? Oh, 

that is interesting, because right now under CDBG the local communities have a lot of autonomy. So apparently, you are going to 

propose something that has much more federal say-so? I guess that 

is a reversal from what I would have thought your direction would 

be. 

Under the proposal now, under very broad guidelines, the communities decide about CDBG. You are now telling me that whether 

or not a community can build housing, they would need approval 

from your department. That is a severe retreat in terms of the 

flexibility that communities have had, and I think it is one more 

mark against the program. 

I have no further questions. 

Mr. NEY. The gentlelady from Florida, who so patiently has sat 

here since the gavel dropped, Ms. Wasserman Schultz? 

Ms. WASSERMAN SCHULTZ. Thank you, Mr. Chairman. 

In the limited time I have, I noted that, Mr. Secretary Jackson, 

you had avoided answering the question about whether you approve of the cuts, and you are choosing not to define them as cuts. 

But as the Ranking Member said, there was $4.5 billion that you 

are zeroing out in your budget. What is in the budget is about $3.7 

billion; $4.5 billion minus $3.7 billion is whatever it is. You do the 

math. That is a cut. So are you in favor of there being less money 

42

now, less money in the future than there is now that funds your 

program, that is currently housed in your department, that will 

under your proposal, no longer be housed in your department? 

Secretary JACKSON. Congresswoman, what I have said is that we zeroed out $4.5 billion out of our budget. How the new legislation 

will look, I am not in a position to tell you. 

Ms. WASSERMAN SCHULTZ. No, no, but I am not asking you that. 

Secretary JACKSON. I am answering your question. I am not in 

a position——

Ms. WASSERMAN SCHULTZ. You are not answering my question, 

with all due respect, and you have not answered any of our questions no matter which way we have asked it. There, in the budget, 

I am not talking about your proposal, but in the budget, the number, the line item, has less money in it now than has been zeroed 

out from your budget, less money. I will just ask you generally. Do 

you support there being less money available for the programs that 

your department currently funds? Do you support that? 

Secretary JACKSON. My position, Congresswoman, is we zeroed out $4.5 billion. 

Ms. WASSERMAN SCHULTZ. That is not a position. That is a statement. 

Secretary JACKSON. May I finish? How the money will be utilized 

when the new legislation is written, I am not in a position to discuss that today. I think Secretary Gutierrez has said before they 

will bring it before the Congress for your evaluation. 

Ms. WASSERMAN SCHULTZ. I think that your answer has been 

telling and pretty much implicitly answers the question. 

Secretary Gutierrez, can you tell me what the current mission of 

the Department of Commerce is? And if it has anything whatsoever 

to do with housing? 

Secretary GUTIERREZ. The current mission is to improve economic conditions throughout the country. I am not using the specific words, but I think you want the concept. It is all about encouraging economic growth, setting the environment for economic 

growth, for innovation, for job creation. That is the mindset that 

we want to apply to local communities. 

Ms. WASSERMAN SCHULTZ. You stated that you think that we can 

do better in general. How is it that Commerce can do a generally 

better job than HUD on the programs that you are consolidating 

under your department? 

Secretary GUTIERREZ. As you state, because of our mission, we 

are focused and our systems are focused on economic growth, on job 

creation, on attracting private sector capital. That is the kind of 

mindset that we believe we owe our people who are receiving this 

money so that they in turn can have access to more jobs, to more 

capital, to more growth. 

Ms. WASSERMAN SCHULTZ. Why can’t all of that be done in the 

Department of Housing and Urban Development? Why is it better 

to do it in the Department of Commerce, whose mission does not 

include anything related to housing? 

Secretary GUTIERREZ. But our mission is all about economic 

growth and economic development and job creation. 

Ms. WASSERMAN SCHULTZ. None of which has anything to do 

with housing. 

43

Secretary GUTIERREZ. It does. If the housing is inadequate in a 

given community, that community will not be able to attract investment. 

Ms. WASSERMAN SCHULTZ. What do you consider to be the mission of the CDBG program and affordable housing programs? Are 

they to create jobs? 

Secretary GUTIERREZ. The mission of Commerce is to create an 

environment whereby we can create jobs, we can create growth, innovation and entrepreneurship. We want to apply that mindset to 

all of these funds. 

Ms. WASSERMAN SCHULTZ. You do not feel that what you are 

doing here is trying to fit a square peg into a round hole? 

Secretary GUTIERREZ. No, what we are trying to do here is to utilize our taxpayers’s money to go to those people who need it the 

most. 

Ms. WASSERMAN SCHULTZ. Mr. Chairman, I think it would be 

wise when we see this proposal that included in it should be the 

change in the name of HUD to UD, so that that will more clearly 

define what its future mission will be. 

Thank you. I yield back the balance of my time. 

Mr. NEY. The gentleman, Mr. Davis? 

Mr. DAVIS OF ALABAMA. Thank you, Mr. Chairman. I will be extremely brief. 

Given the time, Mr. Gutierrez, let me ask you in 30 seconds, tell 

me in the most succinct language possible, tell me the single biggest obstacle to minority business development in this country, for 

the sake of time, in 30 seconds or less if you can, just a couple of 

phrases. 

Secretary GUTIERREZ. I would say based on my experience, the 

single biggest obstacle would be access to capital. 

Mr. DAVIS OF ALABAMA. Tell me how any of the changes that are 

being proposed would address the problem of access to capital for 

minority business? 

Secretary GUTIERREZ. Access to capital is done through beneficial 

loans. It is done through private sector investment. 

Mr. DAVIS OF ALABAMA. No, tell me how these specific changes, 

the cuts and the consolidation, would take us a step closer to dealing with the access to capital problem? 

Secretary GUTIERREZ. Because our mission in Commerce is to 

help businesses, to help small businesses, large businesses. We 

have a minority business——

Mr. DAVIS OF ALABAMA. I understand that, but not to cut you off, 

but as you know our time is pressed. Tell me how the changes, tell 

me how the consolidation and the cuts would take us further down 

the path to dealing with the lack of access to capital. 

Secretary GUTIERREZ. Because we are in the business of creating 

jobs, and jobs are created through capital. And that is what we do 

at Commerce. 

Mr. DAVIS OF ALABAMA. So no specific explanation of why the 

consolidation or cuts would work. 

Secretary Jackson, a similar question to you, the single biggest 

problem in 30 seconds or less, or the single biggest obstacle to providing more affordable housing? Thirty seconds or less. 

44

Secretary JACKSON. I think we have addressed many of the 

issues to addressing affordable housing. We have the American 

Dream Downpayment——

Mr. DAVIS OF ALABAMA. No, no, no. Tell me the single biggest remaining obstacle to expanding affordable housing. 

Secretary JACKSON. Well, down payment and closing costs. 

Mr. DAVIS OF ALABAMA. Tell me how the proposed cuts or the 

consolidation would take us a step closer to addressing that problem. 

Secretary JACKSON. First of all, that portion of HUD is in no way 

being affected. 

Mr. DAVIS OF ALABAMA. Okay. Well, the point that I am making, 

and I will not debate you for the sake of a limited time frame, the 

fact that we have to go vote, but my concern, gentlemen, is there 

is an embrace of the idea of cuts because we need to save money. 

The reality is that these cuts are minimal as things go in the 

course of a $2.9 trillion budget, but yet this minimal amount of 

money is important to accomplishing the goals of these programs. 

I would be more comfortable and a lot of people on the committee 

would be more comfortable if there was some correlation between 

these changes, these consolidations and these cuts and the missions of your two agencies. I have not heard it today. I do not think 

my colleagues have heard it. All that we have heard is the cuts are 

good because we need to save money. The reality is, this does not 

save a lot of money. I would feel a lot better, as would my colleagues, if the cuts took us, and the changes took us a step further 

to accomplishing the goals of your agencies. 

I yield back the balance of my time. 

Mr. NEY. The vote is on. We will know in 30 seconds or less 

whether we will be back for a second panel. 

The Chair notes that some members may have additional questions, of course, for this panel, which they might want to submit 

in writing. Without objection, the hearing record will remain open 

for 30 days for members to submit written questions for these witnesses and to place their responses in the record. 

With apologies to OMB, I am sorry for the inconvenience. It is 

hard to predict the votes today. Any statements you would have or 

testimony for the record, we would welcome for the record. 

[The prepared statement of Clay Johnson III can be found on 

page 73 in the appendix.] 

One thing further for the Secretaries, I would note some of the 

members are leaving for the funeral of the Pope. So as a result, 

some people will not be able to be back and plans have changed 

for people leaving the capital. 

With that, I want to thank the members of the panel and OMB. 

Again, thank you very much. 

[Whereupon, at 3:38 p.m., the committee was adjourned.] 

(45)

A P P E N D I X

April 6, 2005

46


22764.001
47


22764.002
48


22764.003
49


22764.004
50


22764.005
51


22764.006
52


22764.007
53


22764.008
54


22764.009
55


22764.010
56


22764.011
57


22764.012
58


22764.013
59


22764.014
60


22764.015
61


22764.016
62


22764.017
63


22764.018
64


22764.019
65


22764.020
66


22764.021
67


22764.022
68


22764.023
69


22764.024
70


22764.025
71


22764.026
72


22764.027
73


22764.028
74


22764.029
75


22764.030
76


22764.031
77


22764.032
78


22764.033
79


22764.034
80


22764.035
81


22764.036
82


22764.037
83


22764.038
84


22764.039
85


22764.040
86


22764.041
87


22764.042
88


22764.043
89


22764.044
90


22764.045
91


22764.046
92


22764.047
93


22764.048
94


22764.049
95


22764.050
96


22764.051
97


22764.052